IMAGE  EVALUATION 
TEST  TARGET  (MT-3) 


1.0 


1.1 


lu  Ui   12.2 

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lit  I 

lU       I 

u 

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140 


II.25  IIII.4 


■  2.0 


1.6 


Photographic 

Sciences 

Corporation 


23  WEST  MAIN  STREET 

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^1i^ 

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CIHM/ICMH 

Microfiche 

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CIHM/ICMH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microreproductions  /  Institut  Canadian  de  microreproductions  historiques 


Tachnical  ond  Bibliographic  NoUt/Notas  tachniquat  at  bibliographiquat 


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tha  usual  mathod  of  filming,  ara  chackad  balow. 


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una  image  raproduite,  ou  qui  peuvent  exiger  une 
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sonl  indiquAs  ci-dessous. 


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I      I    Covers  damaged/ 


Couverture  eodommagia 


y 


Pages  damaged/ 
Pages  endommagies 


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D 
D 
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Covers  restored  and/or  laminated/ 
Couverture  restaur6a  et/ou  pelliculAe 

Cover  title  missing/ 

Le  titre  de  couverture  manque 


□    Coloured  maps/ 
Cartes  g^ographiquas  en  couleur 


Coloured  ink  (i.e.  other  than  blue  or  black)/ 
Encre  de  couleur  (i.e.  autre  que  bleue  ou  noire) 


Coloured  plates  and/or  illustrations/ 
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Bound  with  other  material/ 
Relii  avac  d'autres  documents 


0 
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n 


Pages  restored  and/or  laminated/ 
Pages  restauries  et/ou  peiliculies 

Pages  discoloured,  stained  or  foxed/ 
Pages  ddcolordes,  tachetdes  ou  piqu^es 

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n 


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La  reliure  serr^e  peut  causer  de  I'ombre  ou  de  la 
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Blank  leaves  added  during  restoration  may 
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II  se  peut  que  certainas  pages  blanches  ajoutias 
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mais,  lorsque  cela  6tait  possibia.  ces  pages  n'ont 
pas  6t6  film^as. 


□    Only  edition  available/ 
Seule  Edition  disponible 


D 


Pages  wholiy  or  partially  obscured  by  errata 
slips,  ti!«sues,  etc.,  have  been  refilmed  to 
ensure  the  best  possible  image/ 
Les  pages  totalement  ou  partiellement 
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obtenir  la  meilleure  image  possible. 


D 


Additional  comments:/ 
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This  item  is  filmed  at  the  reduction  ratio  checked  below/ 

Ce  document  e:t  film6  au  taux  da  reduction  indiqu6  ci-dessous 

10X                            14X                             18X                            22X 

26X 

30X 

/ 

12X                            1SX                            20X                             24X                            28X                            32X 

ails 

du 

difier 

une 

iage 


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gtnirosit*  do: 

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Univanity  of  Toronto  Library 

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plus  grand  soin,  compte  tonu  do  la  condition  at 
de  la  nettet*  de  l'exemplaire  film*,  et  en 
conformity  avec  les  conditions  du  confat  de 
filmage. 


Original  copies  In  printed  paper  covers  are  filmed 
beginning  with  the  front  cover  and  ending  on 
the  last  page  with  a  printed  or  illustrated  impres* 
sion.  or  the  back  cover  when  appropriate.  All 
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sion, and  ending  on  the  last  page  with  a  printed 
or  illustrated  impression. 


Les  exemplaires  originaux  dont  la  couverture  *.i 
papier  est  ImprimAe  sont  filmis  en  commen^ant 
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derniAre  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration,  soit  par  le  second 
plat,  selon  le  cos.  Tous  les  autres  exemplaires 
originaux  sont  filmte  en  nommen^ant  pa/  la 
premiere  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration  et  en  terminant  par 
la  dernlAre  page  qui  comporte  une  telle 
emprjinte. 


The  last  recorded  frame  on  each  microfiche 
shall  contain  the  symbol  — ^>  (meaning  "CON- 
TINUED "),  or  the  symbol  V  (meaning  "END"}, 
whichever  applies. 


Un  des  symboies  suivants  apparattra  sur  la 
derniire  imase  de  cheque  microfiche,  selon  le 
cas:  le  sym'jole  — ►  signifie  "A  SUIVRE",  le 
symbole  Y  signifie  "FIN". 


Maps,  plates,  charts,  etc.,  may  be  filmed  at 
different  reduction  ratios.  Those  too  large  to  be 
entirely  included  in  one  exposure  are  filmed 
beginning  in  the  upper  left  hand  corner,  left  to 
right  and  top  to  bottom,  as  many  frames  as 
required.  The  following  diagrams  illustrate  the 
method: 


.83  cirtes,  planches,  tableaux,  etc.,  peuvent  Atre 
fiimts  A  des  taux  de  riduction  diffirents. 
Lorsque  le  document  est  trop  grand  pour  Atre 
reproduit  en  un  soul  c'^i^hi,  11  est  film*  d  partir 
de  Tangle  sup4rieur  gauche,  de  gauche  A  droite, 
et  de  haut  en  bas,  en  prenant  le  nombre 
d'images  n^cessaire.  Les  diagrammes  suivants 
illustrent  la  m^thode. 


rata 

D 


>elure. 


J 


32X 


1 

2 

3 

1 

2 

3 

4 

5 

6 

I  •  S  S  A  Y  S 


IS     I  1 1  K 


l-iNAXiiAi-  History  OF  Canada 


IIY 


I  AM  1-S     A.     M.  LI'  A.M.    A.M 


( 'iiiri  i<i/j>  /'i.'/iTi'  III 


/Wi/I    !(.'     ■'■•I'll' 


nMI  r  '  KW  l-i   TAIi  I  lAl     1  1 


1  lll.MKN  1    i>l-   TIIK    Kl  '^ 


I'lKl'-MKNIM  1  ■■!<    1  III'. 


llK.I.KKl'     'F    L)0(  TOK 


I'llll.KOl  HV    IN     1  UK 


I'mVKH^I  lY     Kai  1    I  1  V    .11      T'll  1  I  1..AI 


Si  ll-.N'  K,    COI  VMHIA    t'iM.I  HI 


COLUMHI A    COLLKGK 


.\'/:n'  It; A' A'. 


irx- 


ESSAYS 


—  IN   THE- 


Financial  History  of  Canada 


-<*(!l 


BY 


JAMES    A.    McLHAN,    A.M, 

University  Fellow  in  Politieal  Scitnet. 


SUIM1.T«D  IN  FAHT.AI.   riM.KILM.NT  Of  THB   HKQUIRBMBNTS  FOR  THB  DkOREB  OK  DoCTOR 

or  Phii-osophv  in  ths  Univkhsitv  Faculty  of  Political 

SCIKNCI,   COIUMBIA   COLI.HCK, 


I. 


1 


COLUMBIA    COLLICGE 
NEW  YORK. 
1894. 


« 


k 


•r 
J 


1  <  fc-  / 


.«»     -^^1 


rif*^' 


TAIilJ-   OF  CONTENTS. 

I  » 

PAOB. 

I.      Ihe  Provincinl  Revenues  during  the  French  Period  • 

II.      Ihe  Puhlic  Domain* 

III.  The  Crown  Revenues 3, 

IV.  Customs  Duties  ,, 

V.    Direct  Taxation .y 

VI.    The  Financial  Uasis  of  Confederation 59 

*  7'Aisf  Essays  art  in  mainisaipt. 


s 


r  o 


f      .V 


/' 


III. 

'1*111'.  Ckown  Kkvfnuks.* 

Ill  this  essay  wr  shall  try  to  sec  to  what  oxtciu  ihr 
dlfticultifis  iKtwccn  (ircai  Hritain  and  her  North 
Am«'rii:an  colonics  iluriii^  the  second  (luarter  of  this 
century  may  be  regarch-il  a ;  a  dispute  over  the 
control  of  certain  nrveinu^s  arising  in  tlu;  provinces  ; 
and  to  what  <:\tent  the  granting  of  responsible 
government  in  1S47  was  inciilent  to  the  surr(Muler 
by  Great  Britain  of  all  claim  to  that  control. 

Until  the  decade  from  1845  to  1855  in  all  the 
British  North  American  provinces  there  existed  a 
distinction,  more  or  less  clearly  recognized,  between 
the  revenues  which  were  at  the  disposal  of  the  local 
legislatures  and  those  which  were  under  the  exclusive 
control  of  the  Lords  of  the  Treasury  in  England  or 
their  subordinate  officers,  the  Governors  in  Council  in 
the  di.iferent  provinces.  The  former  were  expended 
upon  local  improvements  and  in  payment  of  the 
ofitic(  rs  of  the  legislature,  the  latter  for  the  support 
of  the  executive.  This,  at  any  rate,  was  the  theory^ 
But  in  practice  the  two  funds  were  received  and 
p.'ad  out  by  the  same  official  and  were  thus  very 
o.'ten  confused.  In  each  of  the  colonies,  there- 
fore, the  Crown  Revenues  formed  a  fund  by  which 

•  Chrislic's  "  History  of  Lower  Canada"  contains  a  goo<l  many  quotation» 
.rom  ori^in.il  sources.  The  rest  must  be  looked  for  in  the  Colonial  and  V-'xtc 
papers,  the  journals  of  the  Assemblies  and  Councils,  and  the  public  accounts.. 

21 


•t 


Till  CKOWN    KKVKNUES. 


the  govrrnmcMt  could  hr  carrirt!  on  inde-prn- 
detuly  of  lh<.'  wislii's  of  tin?  it'^islatur«!;  and  it  soon 
lK*cain<r  cl<Mr  to  thv  people  of  the  proviiu:<'s  who 
dt;Hir(!cl  a  rrsponsihlt?  ^^ov^•rnlnl•nt  that  the  first  and 
most  nccc'ssary  step  was  to  st'ciire  toniroi,  not  only 
of  their  own  provincial  rev«'niies,  which  they  hati 
not  always  ^uardeil  with  sufficient  rare,  hut  of  the 
crown  r<;venues  as  well.  Indeed,  their  aim  can  not 
bt;  said  to  have  been  so  much  to  secun;  "responsible 
government"  by  means  of  obtaining  ronirol  of  all 
the  public  revenues,  but  rather,  simply  as  a  pure 
busin(!ss  matter,  and  .is  an  end  in  itstilf,  to  mana^^e 
what  they  conceived  to  be  their  own  property  in  th(Mr 
own  way.  This  point  once  ji;ained  what  was  calleil 
responsible  government  necessarily  appearcxl.  For 
when  in  1S47  the  Hritish  (iovernment  fmally  sur- 
HMidered  control,  Lord  ICIjrin,  asitle  from  his  own 
predilections  in  favour  of  self-jrovernment  in  the 
colonies,  would  ha\e  been  oblijred,  as  William  !II. 
was  obliged  at  the  end  of  the  seventeenth  century, 
to  choose  those  ministers  who  could  induce  Par- 
liament to  vote  the  supplies. 

But  during  the  second  quarter  of  this  century  the 
struggle  went  on.  It  may  perhaps  be  conveniently 
divided  into  three  stages  : 

I.     The  struggle  to  obtain  control  of  the  duties  levied  under 
acts  passed  |)rior  to  18  Geo.  111. — the  Declaratory  Act. 

II.  The  struggle  to  obtain  control  of  the  Revenues  arising  from 
the  domains  of  the  crown — public  lands,  mines,  forests- 
the  king's  posts,  etc.  \ 


^1 


\ 


TIIK  <  MOWN   RKVKNUKH. 


is 


III.  The  itriiKKlc  id  olttain  control  of  the  (.'ivil  Mat  with  which 
the  (toviTMiiicnt  of  (>re.it  Mritniri  h.iil  conditioni'il  iti 
KurrciitUM  ol  tho  laat  niciitiuriuii  rvvcnuvit. 

Nova  Scotia  rt'crivt'd  a  re>pr<'s«'ntaiive  asHfinhly  in 
I7SH,  Ntrw  lirimsw'ici<  in  17^4,  and  lI|M>fr  and 
LoW(!r  Canada  in  I7(>i.  In  all  of  thcst;  colonie-s  the 
Crown  r«'V<'iun's  wirre  at  first  init;(|iial  to  tin?  ex- 
jmnditiirt*  lor  civil  j^ovt-rnnifnt.  As  th«'  colonial 
j^ovt!rnors  wv.rv.  at  the  lu;ad  of  a  military  as  wt:ll  as 
a  civil  rstal)lislnncnt,  tin-  d<  ricicncy,  though  often 
ttinporarily  siipplird  from  the  strictly  provincial 
rcviMUies,  was  itt  most  casrs  finally  mad'  up  l)y  drafts 
upon  the  army  and  navy  «;stimat(!s  at  home.  Until 
1826  Upper  Canada  rccoived  aid  from  the  lm|)(!rial 
Treasury,  Nova  Sc)tia,  imiil  1H31,  atul  Prince 
lulvvard  Islanil  until  1H51.  Some  of  thr.  early 
j4ovt,'rnors  are  found  even  rccommendinjf  that  the 
pi:o|)le  be  not  askeil  to  levy  taxes  on  themselves 
for  fear  that  they  mij^hi  desire  to  control  the 
revenues  arising  from  them. 

So  long  as  the  revenues  were  insufficient  to  meet 
the  e'xpentlitures,  the  governor  was  willingly  left  to 
'live  of  his  own' — assisted  by  grants  from  the 
government  at  home.  ihe  colonists  were  in  no 
hurry  to  raise  the  (juestion  of  constitutit)nal  principle. 
In  Lower  Canada  they  seem  for  a  number  of  years 
to  have  overlooked  the  unauthorized  appropriation  of 
revenues  strictly  provincial.  In  Upper  Canada  an 
occasional  burst  of  loyal  feeling  might  induce  them 
to  grant  something  "  in  aid  of  His  Majesty's  re- 
venues "     But  in  no  case  were  the  colonists  eager  to 


/ 


/ 


<"' 


/ 


24 


THK  CROWN    REVENUES. 


assume  the  whole  charge  of  civil  j^ovcrnnieni  when 
that  would  mean  an  increase  in  the  burden  of  tax- 
ation. But  the  very  first  year(r8io)  in  which  the 
returns  showed  an  excess  of  receipts  from  all  sourc(;s 
over  expenditure,  we  find  the  assembly  of  Lower 
Canada  drafting  a  petition  "  that  the  Legislature  may 
be  allowed  to  assume  the  charge  of  the  civil  govern- 
ment of  this  Province "  ;  which  of  course  meant 
nothing  else  than  that  all  the  public  funds — the 
Crown  revenues  as  well  as  the  Provincial — should 
be  placed  under  the  Legislature's  control. 

The  war  of  1812-15  postponed  the  question  Am*  a 
time,  and  it  is  not  until  1817  that  it  comes  up  again. 
The  Crown  revenues  of  Lower  Canada  of  themselves 
were  still  insufficient.  The  war  office  objected  to 
more  expenditure  for  civil  purposes  in  the  colonies. 
The  governor,  therefore,  turned  to  the  legislature  and 
asked  them  to  make  good  their  offer  of  18 10,  and 
to  supply  the  deficiency  by  a  grant  from  the  pro- 
vincial revenues.  The  legislature  complied,  but 
upon  the  demand  of  a  much  larger  sum  the  following 
year,  before  consenting  to  vote  the  supplies  they 
insisted  upon  receiving  from  the  executive  a  satisfac- 
tory account  of  the  expenditure  not  only  of  the 
Provincial  but  also  of  the  Crown  revenues. 

It  would  seem  that  the  governor  was  in  an  awl:- 
ward  position.  The  Crown  revenues  were  insutti- 
cient,  and  the  Legislature  would  not  vote  more 
unless  the  whole  budget  was  handed  over  to  it. 
But  on  the  other  hand,  the  Crown  revenues  formed 


THK   CUOVVN    REVENUES. 


25 


n 


a  sufficiently  large  part  of  the  whole  budget  to 
support  the  more  important  items  in  the  expenses  of 
civil  government,  the  salaries  of  the  executive  and 
the  judiciary ;  and  if  the  Legislature  cut  off  the 
supplies  they  would  be  depriving  their  constituents 
of  roads  and  bridges,  and  the  lucrative  employment 
incidental  to  their  construction.  The  Legislative 
Council  could  be  depended  on  to  throw  out  any 
supply  bill  which  jirovided  for  the  constituents  with- 
out providing  for  the  executive,  or  for  reducing  the 
permanent  appropriations  alread)'  made.  The  two 
parties  to  the  contest  cingaged  in  much  legal  fencing 
and  quibbling.  If  the  assembly  voted  a  lump  sum 
'out  of  all  the  revenues  arising  in  the  Province,'  the 
Council  would  reject  the  bill  as  "assuming  a  control 
over  the  revenues  of  the  Crown."  If  they  voted  a 
sum  without  specifying  the  source  from  which  it  was 
to  be  drawn,  the  governor  assumed  that  it  was 
granted  out  of  Provincial  revenues,  and  would  thank 
them  for  their  liberal  supply  in  aid  of  funds  "already 
appropriated  by  law."  In  any  case  the  governor 
could  get  along  somehow  with  the  Crown  revenues 
alone,  or  if  he  were  bold  enough,  could  appropriate 
the  Provincial  revenues  without  any  authority  at  all. 

But  at  last  the  protests  of  the  assembly  became  so 
loud  that  they  obtained  a  hearing  in  England.  The 
first  point  in  dispute  was  the  question  of  control 
over  the  duties  levied  under  the  Act  of  1774.  This 
was  previous  to  the  Declaratory  Act,  in  which  Eng- 
land renounced  the  right  of  taxing  the  colonists  for 
revenue    purposes.       But   this   latter   act   had    not 


>Wiii   II 


-f«=- 


/ 


1 


26 


THE   CROWN    REVENUES. 


repealed  the  earlier  one  under  which  the  tluties 
were  at  the  disposal  of  the  Lords  of  the  'IVeasury. 
Yet  the  colonists  ventured  to  dispute  their  legal 
authority  to  exercise  such  control,  r.nd  by  resolution 
of  the  Lower  Canadian  Assembly  in  1826,  it  was 
declared  "that  the  statute  of  18  Geo.  III.  c.  12,  had 
not  conferred  any  new  rights  upon  the  inhabitants  of 
the  British  Colonies,  but  is  a  declaratory  act,  the 
enactments  whereof  recognize  and  consecrate  the 
constitutional  maxim,  that  the  colonies  having  a 
representation,  have  an  inalienable  right  not  to  be 
taxed  without  the  consent  of  their  representatives, 
and  that  to  the  Legislature  alone  appertains  the 
right  of  distributing  all  moneys  received  in  the 
colonies." 

But  the  Law  Officers  of  the  Crown  in  England 
gave  it  as  their  opinion  that  neither  the  Act  of  1778 
nor  the  Constitutional  Act  of  1791  had  worked  a 
repeal  of  the  Act  of  1774  and  that  "  these  duties 
having  been  imposed  by  Parliament  at  a  time  when 
it  was  competent  for  Parliament  to  impose  them 
they  cannot  be  repealed  or  the  appropriation  of  them 
in  any  way  varied  except  by  the  same  authority." 
The  colonists  no  doubt  were  legally  in  the  wrong, 
but  the  strength  of  their  case  lay  in  their  argument 
that  it  was  at  any  rate  contrary  to  the  intention  and 
spirit  of  the  Declaratory  Act  that  these  duties  should 
not  be  placed  under  the  control  of  the  Provincial 
Legislature  and  that  "  even  supposing  that  they  had 
no  right  to  interfere  yet  when  those  revenues  were 
not   sufficient   they    had  a  right  to  attach  to  sup- 


THE   CkcnVN    KKVKNUES. 


V 


j)lt'mentary  grants  any  conditions  and  limitations  {i,e., 
as  to  the  ap[>ropriation  of  the  Crown  Revenues) 
which  the  interest  of  the  country  appeared  to  them 
to  require." 

The  justice  of  their  claim  was  recognized  in  1828 
by  the  committee  of  Parliament  on  Canadian  affairs. 
Art(;r  some  negotiation  with  the  Legislatures  for 
a  permanent  provision  in  return  in  aid  of  the  still 
unsurrendered  revenues,  the  Hritish  Parliani'^nt  in 
1832  passed  an  Act  handing  over  the  Crown  duties 
amounting  for  both  provinces  to  about  ^44,000  to 
Provincial  control.  The  Lower  Canadians  accepted 
the  concession  without  making  any  return  ;  but  in 
Upper  Canada  where  the  struggle  had  been  less 
bitter  and  less  complicated  with  other  issues  a  small 
permanent  grant  was  provided  for.  Thus  in  regard 
to  the  Crown  duties  under  the  Act  of  1774  the 
assemblies  had  come  off  victorious  and  the  struggle 
entered  on  the  second  stage. 

The  only  funds  now  remaining  at  the  disposal  of 
the  governor  were  the  hereditary,  or  casual  and 
territorial,  revenues  of  the  Crown.  In  Lower  Canada 
these  accrued  from  the  rent  of  the  king's  posts,  the 
rent  of  the  forges  of  St.  Maurice,  the  quint,  the 
lods  et  ventes,  the  timber  licenses,  the  Seigniory  of 
Lauzon  and  the  Jesuits'  estates  ;  in  Upper  Canada 
from  timber  licenses,  the  crown  land  reserves,  fines, 
etc.;  in  Nova  Scotia  from  quit  rents,  fees  and  royalties 
on  mines,  and  from  similar  sources  in  New  Bruns- 
wick.    In  addition  to  this  the  policy  of  free  grants  of 


38 


TIIK   CROWN    KKVENUKS. 


Crown  lands  had  been  given  up  in  1826  and  the 
pf)licy  of  sale  adopted.  In  Upper  Canada  a  tract  of 
2,000,000  acres  was  sold  to  the  Canada  Company  for 
an  annual  payment  of  ;^20,ooo  lor  seventeen  years. 
In  Lower  Canada  the  British  American  Land  Com- 
pany received  a  smaller  tract,  while  a  company  tor 
similar  purposes  was  organized  in  New  Brunswick 
and  Nova  Scotia. 

Over  these  casual  and  territorial  revenues  the 
Houses  of  Assembly  now  wished  to  obtain  control. 
The  view  which  the  Imi^erial  Government  took  of  the 
matter  may  be  seen  from  the  words  of  the  message 
in  1 83  I,  in  which  the  crown  duties  were  surrendered. 
"  These  revenues  stand  upon  a  different  fooling  from 
taxes  properly  so  called.  They  are  enjoyed  by  the 
Crown  by  virtue  of  the  royal  prerogative,  and  are 
neither  more  nor  less  than  the  proceeds  of  landed 
property  which  legally  and  constitutionally  belongs 
to  the  sovereign  upon  the  throne  ;  "  and  still  more 
plainly  by  the  words  of  Charles  Buller  in  his  report 
on  the  Crown  lands  of  Canada  in  1838: — "The 
waste  lands  of  the  colonies  are  the  property  not 
merely  of  the  colony  but  of  the  empire,  and  ought 
to  be  administered  for  imperial  not  merely  for  colonial 
purposes."  But  the  colonists  took  a  different  view  of 
the  matter.  They  looked  upon  themselves  as  a 
political  society  having  corporate  rights  of  property 
in  the  public  domain  which  was  not  yet  granted  to 
individual  owners.  In  1835,  the  assembly  of  Lower 
Canada  declared  by  address  to  His  Majesty  "that 
your  petitioners  have  reason  to  believe  that  your 


II 


THK   CROWN    KKVKNUKS. 


29 


n  J, 


Majesty's  Government  have  sold  to  the  individuals 
aforesaid  (the  British  American  Land  Company) 
extensive  tracts  of  land  belon^^ing  to  thh  Province 
and  thereby  have  taxed  this  colony  contrary  to  the 
most  important  and  indisputable  rights  of  British 
subjects."  In  the  same  year  the  assembly  of  Upper 
Canada  claimed  that  "the  declaratory  Act  of  1778 
was  a  pledge  from  the  British  nation,  that  the  B.  N.  A. 
Provinces  with  the  reservation  only  of  commercial 
restrictions  might  impose  their  own  taxes  and  direct 
the  appropriation  of  them.  The  danger  and  mis- 
chief are  just  as  great  whether  the  uncontrolled 
expenditure  of  such  moneys  is  derived  from  the  sale 
of  public  lands  or  direct  taxation,"  They  argued 
that  the  constitutional  Act  ot  1791  by  reserving  one- 
seventh  of  the  public  lands  of  the  Province  to  be 
disposed  of  by  the  Crown  implied  a  surrender  of  the 
other  six-sevenths  to  be  disposed  of  by  the  Legisla- 
ture of  the  Province.  Resolutions  to  the  same 
purport  were  passed  in  Nova  Scotia  Assembly  under 
the  leadership  of  Joseph  Howe. 

In  this  question  of  the  hereditary  revenues  of  the 
Crown  as  in  the  case  of  the  Crown  Duties  already 
discussed,  the  colonists  were  legally  in  the  wrong. 
The  public  lands  were  at  law  undoubtedly  the 
property  of  the  Sovereign.  The  real  question  was 
of  a  political  nature,  viz.,  whether  the  King  or  his 
Representative  in  his  administration  of  these  lands 
should  be  guided  by  the  advice  of  a  ministry 
responsible  to  the  British  Parliament  or  by  one 
responsible  to  the    Provincial  Legislature.     Indeed, 


I)  ' 


30 


Till-:  CUOWN    KKVKNUES. 


the  relation  between  the  British  Government  and 
the  Legislatures  of  the  colonies  was  in  this  matter 
strictly  analogous  to  the  relation  existing  in 
I*!nglanci  in  regard  to  the  hereditary  revenues 
between  the  King  and  the  Parliament.  At  the 
accession  of  each  Sovereign  these  revenues  are 
surrendered  to  the  public  use  in  return  for  a 
permanent  provision,  known  as  the  Civil  List,  for 
the  support  of  the  royal  household  and  the 
leading  offic'-rs  of  the  executive  aiul  judiciary. 
Before  surrendering  the  hereditary  revenues  of  the 
Crown  arising  in  the  colonies,  the  iiritish  Govern- 
ment wished  to  make  a  similar  arrangement  for  the 
support  ol  a  colonial  Civil  List.  But  the  requests 
were  generally  refused  as  too  exorbitant,  and  nothing 
was  done  until  the  settlement  of  the  constitution  of 
the  Canadas  in  1840.  By  the  Union  Act  the  casual 
and  territorial  revenues  were  to  be  paid  into  the 
Consolidated  Revenue  Fund  of  the  united  provinc*;, 
but  upon  three  very  important  conditions. 

1.  That  money  votes  should  ojiginate  in  the  executive.  I'hus 
one  of  the  most  important  features  of  the  system  of  cabinet 
government  was  introduced  as  a  condition  to  the  surrender  of  the 
territorial  revenues. 

2.  That  the  control  should  not  extend  to  the  gross  revenues 
but  only  to  the  net. 

3.  That  the  Legislature  should  guarantee  a  fixed  and  somewhat 
large  appropriation  for  the  support  of  a  civil  list. 

These  provisions  were  for  Upper  and  Lower 
Canada  incorporated  into  the  Union  Act  of  1840. 
It  was  with  some  reluctance,  and  only  after  some 


THE  CROWN    Rl'VKNUKS. 


31 


i 


modifications,  that  they  were  accepted  by  the  Lower 
Provinces. 

3.  A  third  step  was  therefore  still  to  be  taken  before 
the  provinces  could  be  said  to  enjoy  free  control  of 
the  public  revenues.  The  entire  tt^rritorial  revenues 
must  be  handed  over  to  the  officers  of  the  Legislature 
and  the  permanent  appropriation  of  ^'75,000  a  yiar 
made  by  the  Union  Act  must  be  repealed  and 
made  to  rest  solely  upon  provincial  enactment. 
Almost  immediately  after  the  Union  the  Civil  List 
was  brought  up  for  discussion.  In  1843  the  Assembly 
of  Canada  passed  a  series  of  resolutions  declaring 
"  I.  That  no  appropriation  of  public  money  ought  to 
be  made  without  the  consent  of  the  Assembly. 
2.  That  the  appropriation  of  ^"7 5,000  by  the  Union 
Act  for  the  administration  of  justice  and  the  support 
of  government,  however  expedient  it  may  have  been 
under  the  peculiar  circumstances  of  the  Canadas  at 
the  time  of  the  passing  of  the  Act,  is  unsatisfactory 
to  the  people  of  this  province  as  tending  to  create 
abuses  in  the  misapplication  of  public  moneys.  3. 
That  the  repeal  of  that  appropriation  would  tend  to 
produce  contentment  and  cement  the  union  with  the 
parent  state.  5.  That  the  existing  charges  upon 
the  Civil  List  are  generally  exorbitant  and  ought  tO' 
be  reduced.  6.  That  this  house  is  prepared  to  make  a 
suitable  provision  for  the  Civil  List  upon  the  repeal  of 
the  appropriation  made  by  the  Union  Act."  By  an 
Act  in  the  year  1 846  the  Canadian  Parliament  made  a 
permanent  provision  for  the  support  of  the  Governor 
and  the  Judiciary  and  a  provision  during  the  life  and 


32 


THE  CROWN    KKVKNUKS. 


five  years  thereafter  for  the  salaries  of  executive 
officers,  pensions  etc.,  "  provided  always  that  the 
same  shall  be  acctipted  and  taken  by  Her  Majesty 
by  way  of  a   Civil    List   inst«:ad  of  all  territorial  and 


)th( 


thi 


It 


otner  reveniuis  arising  m  tnese  provnices  now  ; 
the  disposal  of  the  Crown."  These  j^ross  revenues 
were  to  be  paid  over  to  thtr  Consolidated  luind  of  the 
Province  and  tlu;  Act  was  to  take  efft.'ct  only  upon 
the  repeal  by  the  Uritish  I'arliaint^ni  of  the 
appropriation  claus(?s  of  the  Union  Act.  '1  he 
Mritish  Parliament  accepted  the  offer  ;  and  the  usual 
barjjjain,  the  transfer  of  hereditary  revenues,  in  return 
for  a  permanent  Civil  List,  which  is  made  in  Britain 
between  the  Parliament  and  each  Sovereign  upon 
ascending  the  throne,  took  in  this  case  the  form  of  a 
compact  between  the  Canadian  Legislature  anti  the 
British  Parliament  in  the  Imperial  Act  of  1847 
meeting  and  confirming  the  Provincial  Act  of  the 
previous  year. 

In  the  Maritime  Provinces  the  development  was 
somewhat  similar.  Though  in  these  Provinces  the 
revenues  arising  under  acts  passed  prior  to  18  Geo. 
III.  were  not  very  large,  and  the  different  stages  of  the 
dispute  are  not  so  sharply  defined,  the  nature  of 
the  struggle  was  the  same,  and  the  conditions 
attached  to  the  surrender  of  the  revenues  were  the 
same,  as  was  also  the  final  solution.  It  vould 
seem  also  that  many  of  the  distinctive  features  of 
the  histories  of  these  provinces  can  best  be  explained 
from  the  point  of  view  suggested  by  a  close  compari- 
son of  the  Crown  and  the  Provincial  Revenues. 


r^ 


IV. 


Customs   Duties. 

In  the  present  essay  we  shall  try  to  indicate  some- 
thing of  the  part  played  by  customs  duties  in  the 
revenue  systems  of  the  provinces  and  see  \Vhether 
this  brings  any  litth;  light  to  the  reading  of  their 
political  and  financial  history. 

The  most  noteworthy  features  of  the  tax  systems 
of  the  provinces  before  confederation  as  compared 
with  those  of  the  Commonwealths  of  the  Uniteil 
States  are  the  jjrominence  of  the  i)art  assigned  to 
customs  and  the  absence  of  the  general  properly 
tax.  The  reasons  for  this,  i)erhaps,  are  partly 
political  and  partly  economic. 

The  provincial  governments  retained  the  power 
to  levy  customs  iluties.  surrendered  by  the  States  in 
I  789,  until  their  confederation  almost  a  century  later. 
Their  relations  with  England  also  freed  them  from 
the  necessity  of  incurring  any  large  national  expendi- 
tures for  defence.  Thus  it  was  possible  for  them  to 
meet  their  small  ordinary  expenses  by  levying  duties 
on  imports,  supplemented  by  excise  and  minor 
duties  and  the  revenues  arising  from  the  public 
lands. 

Even  if  a  direct  tax  on  property  had  been  levied 

for  provincial  purposes  there  was  no  adequate  local 

machinery  in  the  then  feebly  organized  municipalities 

10  collect  it. 

33 


34 


I!     I 


.USTOMS   DUIIKS. 
com  I 


Lonl  Durham  complaiiu'tl  in  1S38  that  it  was  im- 
possible to  fiiul  a  county  officer,  even  to  arrest  a 
criminal  at  the  commaiul  of  the   Executive  (iovern- 


mcnt. 


liesicl 


es,  owm^ 


to  tl 


IC    IH'.UCt 


ful 


conditions  o 


f 


the  early  settlements  and  to  the  land  policy  ol  the 
^ovrrnmcnt,  the  settlers  wvrv.  so  widely  scattereil 
that  it  would  have  been  difficult  even  for  a  stronj;^ 
executive  with  a  sufficient  machinery  to  atlminister 
a  general  property  tax,  and  the  early  executives  in 
he  [)rovinces  were  not  stron;,^ 

To  these  reasons  may  perhaps  be  added  the 
economic.  The  lands  wv.rc  only  partly  cleared  pre- 
vious to  1840,  and  of  littlo  value,  money  was  scarce, 
there  was  little  accumulated  wealth  of  any  kind,  antl 
consequently  no  basis  for  a  productive  general 
property  tax.  Llndi-r  these  circumstances  it  is  not 
surprising  that  the  preference  was  given  to  Customs 
duties  which  were  fairly  easy  to  collect  and  were 
paid  without  protest,  and  on  the  whole  perhaps 
pressed  pretty  'venly  on  a  people  in  this  sMge  of 
economic  de/elopment. 

Up  to  Confederation  then,  customs  duties  were 
the  mainstay  in  the  Provincial  revenue  systems 
as  they  have  been  in  the  Dominion  system  since 
that  time.  There  were  other  revenues,  and  in  Canada 
very  important  ones,  arising  from  excise  duties  on 
tobacco  and  spirits,  public  lands,  and  an  impost  on 
banks,  but  little  will  be  lost  by  omitting  these  and 
confining  ourselves  to  the  central  feature  of  the 
systems — the  customs. 


i  t 


CUSTOMS    DUTIKS. 


35 


Thrsi;  customs  tlutitrs  are  to  he  diviiUnl  into  two 
classes:  —  I.  The  Iiiiperial  tluties  levicnl  imder  the 
acts  passed  by  the  l''n^;hsh  Parliament  for  the 
regulation  of  trade,  and  2.  IVovincial  dutie*  levied 
untlt^r  the  revenue  acts  passed  by  the  I.e'^islatures 
of  the  I'rovinctrs.  I'he  small  rtrvenues  arisinj;  under 
acts  of  the  first  class  were  (,'X|)end(;d  under  the 
authority  of  the  l^njj;lish  Lords  of  tht;  'I'r<!asury.  and 
ordinarily  in  the  support  of  tlu!  Imperial  customs 
establishmtMits  in  llu:  colitni(!S.  'I'he  proceeds  of  the 
second  were  under  the  control  of  the  Legislatures  of 
the  Provinces. 

Inipctial  Ditiii's.-—i)i  \.\\v.  earlier  Ads,  the  most 
important  was  the  Ouebec  Kt!veinie  Act,  passed  in 
17:4,  "  to  establish  a  fund  towards  further  defraying 
the  charges  of  the  administration  of  justice,  and  the 
support  of  the  civil  government  within  the  Province 
of  (Juebec."  It  imposed  3d.  a  gallon  on  British 
spirits,  yd.  on  British  colonial  spirits,  and  is.  on 
foreign  spirits,  3d.  on  molasses  imported  in  British 
or  Quebec  ships,  and  6d.  on  molasses  imported  in 
ships  belonging  to  the  colonies.  A  duty  of  ^i. 
1 6s.  was  also  levied  on  licenses  for  keeping  a  house 
of  public  entertainment. 

The  annual  proceeds  of  this  act  amounting  to 
jC 5,771  in  1792,  and  ^52,040  in  1833,  were  handed 
over  to  the  Provincial  Legislatures  of  Upper  and 
Lower  Canada  In  1831,  and  the  transfer  was  sanc- 
tioned by  an  act  of  1832.  The  Quebec  Revenue  Act 
has  some  importance  in  constitutional  history,  because 


|6  (  UMTUMH  tiUTlKM. 

it  W.11  ovpr  the  rcvcnufs  nrlninR  uncl«y  it  thiit  the  first 
iii«|)utc*t  Lx'twern  tiic  IIouh(!H  of  ANHCinbly  and  the 
Govcrtiorn  aro-ir,  ati<l  u%  the  act  i*  a  rr venue  act  aiul 
levi(!K  intcriial  aH  well  as  rxtrrnai  iliitifs,  it  throwH 
tome  li^ht  on  the  coriMtitutional  relations  Ix'tiVfcn 
lEti^land  and  her  colonies.  After  the  pasHin^  of  the 
Declaratory  Act,  however,  with  the  exception  per- 
hups  of  the  Canada  I'rade  Act,  all  the  acts  of  the 
British  I'arliamenl  umler  which  duties  were  levied  in 
the  Provinces  were  acts  pitssed  primarily  for  the 
■regulation  (if  trade  in  the  interestH  of  British  con>- 
merce  and  British  i.ianufactures,  and  the  provincial 
revenues  arising  therefrom  were  merely  incidental 
to  their  general  protective  policy. 

Although  for  the  most  part  incidental,  the  r«*venues 
arising  under  Imperial  Acts  were  still  very  consiiler- 
able,  varying  from  one-fifth  to  three-fifths  of  the 
whole  Customs  revenue,  and  to  this  extent  the 
revenue  systems  of  the  Provinces  wen?  not  under 
their  own  control. 

The  discrimination  against  importations  from 
foreign  countries  was  not  very  great,  varying  gener- 
ally in  the  ad  valorem  duties  from  5  to  15%,  and  it 
would  seem  that  the  colonists  received  a  sufficient 
counterpoise  in  the  discriminations  in  the  English 
tariffs  in  favor  of  colonial  products,  particularly 
timber  anu  grain.  The  Imperial  duties,  however,  and 
the  restrictions  on  trade  met  with  a  good  deal  of  criti- 
cism in  the  colonies,  particularly  in  1835,  and  although 
a  good  deal  of  anxiety  was  felt  when  England  adopted 


nrrrrs.  j^r 

free  tr.uir,  ;i  rt-Hfilution  it)  the  C  anadian  Hounc  of 
AHHPmhIy  in  the  session  ol  1H47,  "That  ihe 
ah.iiulonmt'Mt  of  the  protrctivp  policy  of  Knj^land 
towar«ls  hrr  colonifs  cannot  opcrai*'  othrrwisf  than 
injuriously  on  ihf  trade  and  (otninrrci-  thrrrof  with- 
out atfordinj,'  a  corrcHpoudin^^  benefit  to  our  fellow 
.Hul)je(  ts  of  Cin-at  iiritain,  "  wan  lost. 

My  the  introduction  of  I'rre  Trade  in  1S4O.  and 
the  great  relaxation  in  the  Navigation  Laws  in  1H48, 
the  imperial  protective  system  was  broken  up, 
colonial  |)roducts  were  placetl  on  the  same  joolinj^  an 
articles  of  fon-ij^n  production  in  l''-nj,dish  tariffs,  and 
the  Provinces  were  given  control  of  their  own  tariffs 
and  were  allowed  to  remove  the  iliscriminations  in 
favor  of  the  Knglish  manufacturers,  the  Imperial 
custom  house  officials  wen;  withdrawn  and  the 
colonies  were  given  largely  increased  powers  in  the 
regulation  of  iiavigution. 

But  it  was  no  part  of  Fngland's  plan  that  the 
colonies  should  takt;  up  the  policy  of  protection 
which  she  was  abandoning  and  for  the  next  ten 
years  wv.  find  recently  converted  Hngland  trying  to 
bring  the  colonists  over  to  the  new  faith.  Although 
sht,"  was  surremlering  the  advantage  which  her  matui- 
factures  had  enjoyed  in  the  markets  of  the  colonies, 
she  was  by  no  means  willing  that  they  should  be 
placed  at  an  absolute  disadvantage  under  the 
colonial  tariffs  which  began  to  appear  after  [846.  In 
a  dispatch  of  March  13,  1848,  Lord  Grey  writes, 
'*  Her  Majesty's  Government  readily  acknowledges 


38 


CUSIOMS   DUTIES. 


i 


!    I 


the  propriety  of  leaving  to  the  colonists  the  task  of 
raising  the  revenue  which  they  may  require  by  such 
methods  of  taxation  as  may  seem  expedient — but  if 
any  of  the  duties  comprised  in  the  tariff  have  been 
imposed  not  for  purposes  of  revenue  but  with  a  view 
to  protecting  the  interest  of  the  Canadian  manu- 
facturer, Her  Majesty's  Government  are  clearly  of 
the  opinion  thai  such  a  course  is  injurious  alike  to 
the  interests  of  the  mother  country  and  to  those  of 
the  cf)lony,"  and  the  Canadian  tariff  was  modified 
accordingly  to  meet  the  objections  of  the  Colonial 
office. 

When,  however,  the  financial  difficulties  of  the 
years  1857  and  1858  had  caused  the  Canadian 
finance  ministers  to  propose  an  increase  of  duties  in 
the  tariffs  of  1858  and  1859,  and  the  Duke  of  New- 
casde  in  the  Colonial  office,  on  the  petition  of  the 
Sheffield  manufacturers,  protested  against  the  pro- 
tective features  of  this  legislation  and  mentioned  the 
possibility  of  disallowance,  a  somewhat  spirited  reply 
in  defence  of  his  policy  was  called  forth  from  Sir  A.  T. 
Gait.  "The  government  of  Canada  cannot,"  hr  said, 
"  in  any  manner  waive  or  diminish  the  right  of  the 
people  of  Canada  to  decide  for  themselves  both  as 
to  the  mode  and  extent  to  which  taxation  shall  be 
imposed,"  and  in  this  view  the  British  government 
seem  to  have  acquiesced. 

The  Difficulties  of  Upper  Canada  in  Collecting 
her  Revenue. — When  the  Province  of  Quebec  was 
divided  into  the  provinces   of  Upper   and    Lower 


CUSTOMS   DUTIES. 


39 


Canada  in  1791,  the  act  of  14  Geo.  III.,  levying 
duties  on  liquors,  sugar  and  molasses  to  the  amount 
of  about  ;^  1 0,000  a  year,  was  still  in  force,  and 
the  legislatures  of  both  parliaments  in  their  first 
session  levied  small  duties  on  spirits  in  order  to 
pay  the  incidental  expenses  of  the  legislature. 
But  as  Upper  Canada  had  no  seaport,  and  as  owing 
to  the  great  extent  of  her  border  it  was  thought 
to  be  impossible  to  collect  the  duties  and  to  pre- 
vent fraud;;  on  the  revenue,  an  agreement  with  the 
lower  province  was  entered  into  by  which  "  The 
legislature  of  Upper  Canada  should  not  impose  any 
duties  upon  goods  imported  into  Lower  Canada 
and  passing  into  the  upper  country,  but  should  allow 
the  legislature  of  Lower  Canada  to  imi)Ose  such 
reasonable  duties  on  such  goods  as  they  might  judge 
expedient  for  the  purpose  of  raising  a  revenue  for 
the  province  of  Lower  Canada,  and  that  of  the  net 
produce  of  these  duties  Upper  Canada  should  receive 
one-eighth,  the  other  seven-eighths  remaining  for  the 
use  of  Lower  Canada."  In  one  form  or  another  this 
customs  pool  was  continued  till  the  union  of  the  two 
provinces  in  1841.  A  new  agreement  was  concluded 
in  1797  under  which  an  attempt  was  made  to 
ascertain  the  actual  consumption  of  Upper  Canada, 
and  the  amount  of  drawbacks  due  by  stationing  an 
inspector,  at  Coteau  du  Lac,  to  report  all  dutiable 
goods  passing  from  the  lower  province  up  the  St. 
Lawrence.  Before  181 7  difficulties  had  arisen. 
The  Legislature  of  Lower  Canada  had  levied  new 
duties  without  reporting  the  fact  to  the  inspector, 


T 


40 


CUSTOMS   DUTIKS. 


and  also  goods  were  beginning  to  find  their  way 
into  Upper  Canada  by  different  routes. 

The  commissioners  of  the  province  then  went  back 
to  the  original  plan,  and  after  estimating  the 
population  and  probable  consumption  of  the  two 
provinces,  decided  that  Upper  Canada  should  in 
future  receive  one-fifth  of  all  duties  levied  by  Lower 
Canada  on  goods  imported  by  sea.  This  agreement 
terminated  in  18 19.  By  this  time  differences  had 
arisen  between  the  Governor  of  Lower  Canada  and 
his  House  of  Assembly  and  the  Legislatures  neglect- 
ed to  provide  in  the  sessions  of  18 19  and  1820  either 
for  the  appointment  of  new  commissioners  or  for  the 
payment  to  Upper  Canada  of  her  share  of  the 
revenue,  so  that  four-fifths  of  the  entire  revenue  of 
that  province  was  thus  locked  up.  When  com- 
missioners were  at  last  appointed  it  was  found  that 
those  from  Lower  Canada  had  no  power  to  treat 
concerning  the  claims  to  Upper  Canada  for  arrears 
arising  under  the  agreement  of  1 797,  and  no  decision 
could  be  arrived  at.  Upper  Canada's  representatives 
pointed  out  that  that  the  just  claims  of  their  province 
to  a  part  of  the  duties  had  been  neglected,  that  the 
Treasury  was  empty  and  her  officials  serving  without 
pay.  Lower  Canada  replied  that  "these  things  must 
be  when  one  province  is  dependent  on  another  for 
the  collection  of  its  revenue."  Upper  Canada 
accepted  the  situation  and  did  the  only  thing  possible 
under  the  circumstances — appealed  to  England  and 
succeeded  in  securing  the  passage  of  the  Canada 
Trade  Act  by  which  it  was  made    impossible    for 


«  • 


«  a 


r  I 


J 


T 


CUSTOMS   DUTIES. 


4» 


«  ■ 


w  I 


\l 


Lower  Canada  to  alter  existing  duties  except  with 
the  consent  of  Upper  Canada  or  the  Imperial  Parlia- 
ment and  by  which  a  machinery  was  provided  for  the 
apportionment  of  the  revenues  arising  from  Customs. 

This  solved  the  question  for  the  time;  but  it  turned 
out  that  revenues  which  were  sufficient  for  Lower 
Canada  were  quite  inadequate  for  the  more  pro- 
gressive Upper  Province.  Before  1840  by  building 
the  Welland  Canal,  the  Cornwall  Canal,  and  num- 
erous public  roads,  bridges  and  harbors,  Upper 
Canada  had  incurred  a  debt  of  over  a  million  pounds, 
and  the  whole  revenue  of  /'6o,ooo  was  hardly  ade- 
quate to  pay  the  interest.  Unwilling  to  resort  to 
direct  taxation,  and  unable,  as  she  professed  herself, 
to  administer  an  independent  system  of  indirect 
taxation.  Upper  Canada  had  a  distinct  financial 
interest  in  the  un'On  of  the  two  Provinces  in  1841^ 
by  which  the  debt  of  the  Upper  Province  was 
assumed  by  the  united  Province  of  Canada,  and  the 
revenues  combined  into  a  Consolidated  Fund.  A 
part  also  of  the  hostility  of  Quebec  to  the  Act  of 
Union  may  be  ascribed  to  a  very  natural  objection  to 
assuming  debts  which  she  had  not  incurred. 

Another  result  may  perhaps  be  ascribed  to  the 
situation  of  Upper  Canada  in  regard  to  the  collec- 
tion of  her  customs  revenue.  As  we  have  seen, 
Upper  Canada  was  dependent  for  the  greater  part 
of  her  revenues  upon  duties  levied  under  imperial 
acts  or  by  Lower  Canada,  and  though  these  were 
insufficient    they   could    not   be    increased.     Upper 


/ 


' 


42 


CUSTOMS   DUTIES. 


Canada  was  on  that  account  unable  to  build  the 
main  roads  by  provincial  grants  as  was  done  in 
Nova  Scotia  and  New  Brunswick.  The  govern- 
ments of  the  municipalities  on  the  other  hand,  admin- 
istered by  irresponsible  boards  of  justices  of  the 
peace  were  unable  to  undertake  the  burden.  To 
fill  up  the  gap  then  between  a  weak  provincial 
revenue  system  and  a  weak  municipal  system  all 
sorts  of  bridge  companies,  harbor  companies,  toll 
gate  companies,  and  boards  of  road  trustees,  were 
introduced  to  undertake  the  public  works.  Under 
this  policy  the  country  was  dotted  with  toll-gates 
and  incurred  a  debt  of  ^300,000  without  receiving 
very  much  benefit  from  the  expenditure.  Finally 
Upper  Canada  was  obliged  to  strengthen  the 
government  of  the  municipalities  and  to  transfer  to 
them  the  burden  of  maintaining  local  public  works. 
Apart  from  this  it  would  seem  to  be  hard  to  account 
for  the  earlier  and  more  vigorous  growth  of  muni- 
cipal institutions  in  that  Province,  and  the  strong 
and  rapid  rooting  of  municipal  direct  taxation. 

It  would  seem  then  that  the  situation  of  Upper 
Canada  in  regard  to  the  collection  of  her  customs 
revenue  has  furnished  a  reason  for  the  proposed 
union  of  the  provinces  in  1822,  the  repeated 
proposals  for  the  annexation  of  Montreal,  the  union 
of  1 84 1,  and  finally,  since  it  was  impossible  to  go 
backward,  the  larger  union  of  186;,  for  which  Ontario 
and  Quebec  had  had  some  preliminary  training 
in  the  shape  of  a  long  drill  in  the  management  of 
a  customs  pool.     It  also   seems  to   afford  a  partial 


CUSTOMS    DUTIKS. 


43 


■explanation  for  somt:  peculiar  features  in  the  history 
of  that  province. 

Provincial  Tariffs. — Beginning  with  the  Union, 
the  Parliament  of  the  united  Canadas  by  an  Act  of 
1 8th  SeptemlKT,  1841,  levied  specific  duties  on 
wine,  spirits,  sugar,  coffee,  tea,  molasses,  salt  and 
tobacco  and  an  ad  valorem  duty  of  5%  on  general 
merchandise.  These  duties,  although  the)'  show 
a  considerable  increase  on  those  i)reviously  levied, 
were  still  very  small,  amounting  to  1014%  of  the  value 
of  the  total  imports.  In  1843  duties  on  agricultural 
produce  and  live  stock  were  added,  notably  a  duty  of 
3  shillings  a  quarter  on  wheat  as  a  condition  of 
obtaining  a  discrimination  in  favour  of  Canadian 
wheat  in  the  English  tariff.  On  May  17th,  1845, 
a  general  Act  was  passed  extending  the  specifics 
but  retaining  the  5%  ad  valorem  for  the  unenumera- 
ated  articles.  In  the  next  year  a  discrimination  in 
favor  of  leather  and  leather  manufactures  imported 
by  sea  was  introduced. 

But  no  very  important  change  was  made  until  the 
change  in  the  policy  of  England.  Under  the  author- 
ity of  the  Imperial  Act,  the  Imperial  duties  were 
abolished  and  the  5%  unenumerated  list  was  raised 
to  12^%,  the  specific  duties  increased,  and  a  2jt^% 
list,  including  untanned  leather  and  bar  iron,  added. 

The  Act  of  22nd  April,  1853,  reduced  the  duty  on 
sugar  and  molasses,  repealed  the  duties  on  salt, 
levied  a  uniform  duty  of  6%  per  gallon  and  30% 
ad.   val.,   on   wines,   and  shortened    the    2^%    list. 


H 


44 


ClJSTt)MR  DUTIES. 


leaving  the  12^%  list,  from  which  the  greater  part 
of  the  revenue  was  derived,  untouched.  Under  the 
pressure  of  increasing  expenses  on  May  i6th,  1856, 
the  i2^y4  per  cents  were  raised  to  15%,  leather  and 
india  rubber  mar.afactures  were  raised  to  20%  and  a 
5%  list  was  added. 

The  depression  of  the  year  1857  was  marked  by 
a  grea*^  decrease  in  tiie  revenue,  and  to  meet  tiie 
deficit  the  number  of  enumerated  articles  under 
specific  duties  was  very  much  increased  by  the  tariff 
of  1858  ;  a  duty  of  15%  was  levied  on  the  un- 
enumenited  goods,  20%  on  a  large  list  of  manu- 
factured goods,  including  woollens  and  agricultural 
implements,  25%  on  leather,  boots  and  shoes,  harness, 
saddlery  and  clothing,  and  5%  on  a  list  of  raw 
materials  and  half-manufactured  articles.  This  was^ 
the  most  notable  advance  in  the  direction  of  pro- 
tection. The  changes  were  chiefly  due,  however,  to 
the  need  for  larger  revenues.  In  1859  a  still  further 
increase  was  rendered  necessary  by  the  fact  that  the 
interest  on  an  indirect  public  debt  of  $7,630,643 
became  a  charge  upon  the  revenue  in  1858,  con- 
sequently the  specific  duties  were  done  away  with 
and  ad  valorem  duties  were  levied  of  100%  on 
spirits,  30  to  40%  on  wines,  tobaccos,  cigars  and 
spices,  15  to  30%  on  tea,  sugar  and  molasses,  15%  on. 
leather  and  partially  manufactured  goods,  25%  on 
goods  manufactured  from  the  15  per  cents  and  20% 
on  41%  of  the  imports  paying  61%  of  the  duties. 

The  duties  levied  under  this  act  during  the  first 


! 


CUSTOMS   DUTIE)). 


4S 


nine  months  of  the  year  amounted  to  13^%  of  the 
total  value  of  the  im[>orts  or  19%  of  the  total  value 
of  the  imports  paying  duty.  The  character  of  the 
measure  may  best  be  learned  from  a  letter  of  the 
Finance  Minister  to  the  Colonial  office,  dated  March 
20th,  1859,  "The  policy  of  the  present  govern- 
ment in  re-adjusting  the  tariff  has  been  in  the  first 
place  to  obtain  sufficient  revenue  for  the  public 
wants — but  it  will  undoubtedly  be  a  source  of  grati- 
fication to  the  government  if  they  find  that  the 
duties  absolutely  recjuiretl  to  meet  their  engagements 
should  incidentally  benefit  and  encourage  the  pro- 
duction in  the  country  of  many  of  these  articles 
which  we  now  import.  Hut  the  government  has  no 
expectation  that  the  moderate  duties  imposed  by 
Canada  can  produce  any  considerable  development 
of  manufacturing  industry." 

The  next  important  Tariff  Act  was  that  of  1866, 
passed  with  a  view  to  assimilate  the  Tariff  of 
Canada  to  that  of  the  maritime  provinces  before 
entering  confederation.  The  25  per  cents,  and  the 
20  per  cents,  were  combined  in  a  15%  list,  so  that 
what  may  be  called  the  20%  Tariff  of  1859  became 
a  15%  Tariff  in  1866. 

From  this  slight  sketch  of  tariff  changes  in 
Canada  between  1840  and  1867  it  may  be  gathered 
that  previous  to  1840  provincial  duties  were  levied 
for  revenue  purposes  only,  chiefly  on  liquors,  tea, 
sugar,  molasses  etc.,  that  between  1847  and  1859 
the  increasing  expenses  of  the  country  caused   an 


SSEaa 


46 


CUSTOMS   DUTIES. 


increase  in  the  duty  on  unenumeratcd  articles  from 
5^  to  20/^,  with  a  rorrespoiulinj^  increase  in  the 
ainf)unt  of  incidental  proti.'ction  afforded,  and  that  the 
lowerinj^  of  tiie  chities  in  1866  was  (hu:  to  a  ilesire  to 
brinj^^  them  nearer  the  12^  per  cent,  level  of  the 
maritinu;  provinces. 

In   the    maritime    provinces  a  sonK-vvhat    similar 

development  took  place.    There,  as  in  Canada,  from 

thr(;e-t"ifths  to  four-liflhsof  the  provincial  revenue  was 

dc;ri\ed   from  customs  duti(;s  and  increased  expendi- 

tur(-'s  were  m(;t  hy  raising  the  tariff  schedules.      'IMie 

ciiief  points  of  differences  are  that  the  early  tariffs  of 

the  maritime  provinces  show  much  more  fre(|uent 
discriminations  in  favor  of  English  products  than  those 

of  Upper  and  Lower  Canada,  that  the  principle  of  pro- 
tection received  only  a  very  slight  recognition  in  the 
maritime  provinces  between  1846  and  1867,  and  that 
although  on  account  of  the  greater  consumption  of 
foreign  products,  the  amounts  ot  the  duties  paid  were 
generally  higher  per  head,  the  duties  themselves 
scaled  from  5  to  10%  lower  than  those  of  Canada, 
and  that  until  the  period  of  railway  building  the 
Hivenues  arising  under  them  seem  to  have  been 
quite  sufficient  for  all  provincial  expenses. 


V. 

DiuKCT  Taxation.* 

U(>  to  Coiife'iU'ration  then  the  Provinces  did  not 
find  it  necessary  to  resort  to  dirixt  taxation  to  any 
^r(!at  (!xtent.  Tiiere  seems  to  have  been  some 
general  property  taxes  tor  |)rovincial  piirp()S(;s  in 
Nova  Scotia  before  I <Soo.  lieiween  1758  and  1774, 
indeed,  it  seemed  as  if  Nova  Scotia  was  about  to 
develop  a  system  of  direct  taxation  to  supplement 
the  revenues  arising  from  customs,  Init  the  general 
property  lax  never  became  anything  more  than  an 
emergency  impost,  and  with  the  general  property 
taxes  in  Ontario  for  the  support  of  a  lunatic  asylum 
and  for  a  jury  fund,  the  direct  taxes  in  Prince 
luKvard  Island,  direct  taxes  for  the  support  of  educa- 
tion, and  some  scaitered  and  unimportant  taxes  on 
expenditure,  may  be  set  down  as  exceptional. 

*  Apart  from  tlie  IcKislalion  on  the  sulyecl  ( Library  of  the  Nt-w  York  liar 
Association,  or  the  Library  of  Parliament,  Oltawn),  the  sources  of  information 
are : 

The  Ontario  Township,  J.  M.  McKvoy  ;    Toronto,  1S89. 

The  Reports  of  ihc  (  oniinissioiiers  on  Municipal  Institutions  in  Ontario  ; 

Toroiilii,  1888  and  1889. 
The   Report   of   the   Conunission   on    Municipal   Taxation   in   Ontario ; 

Toronto,  189J. 
'The    Reports  of    the    Bureau   of    Industries   for   Ontario  on  Municipal 

Statistics  in  1889  ami  1^94. 
Municipal  Statistics,  Quebec,  1893. 
The   Municipal   Returns   in   the  Journals   of   the   Legislatures   and   the 

Sessional  I'apers. 
The  Annual  Reports  of  the  City  Treasurers. 
Except  for  the  cities,  the  statistics  for  Quebec  are  very  imperfect,  and  there 
appear  to  be  no  returns  for  the  counties  of  the  Maritime  Provinces. 

47 


48 


DIKKCT  TAXATION. 


Hc'fonr  1H67,  tht;  IVovincrs  haviiij;  rcvcmirs  from 
ciisioius  excise  aiul  crown  laiuls,  were  not  ol)li^<Hl  to 
Jevy  (lir(!Ct  taxes,  ami  since  that  time  they  have  foinul 
Dominion  Kubsitiies,  crown  lands,  and  license  duties 
tiulfice,  and  hive  left  the  fijen<!ral  |)ro|)erly  tax  to  the 
municipalities.  At  the  present  time,  therefore, 
when  some  of  the  American  commonwealths  are 
fmdinj;  the  general  proptTly  tax  unsatisfactory  as  a 
state  lax,  and  are  bej.;inning  to  leave  the  taxation  of 
real  estate  to  the  municipalities,  it  might  seem  hel|)- 
ful  to  draw  a  comparison  between  such  systems  and 
those  of  the  Provinces  where  the  general  property 
tax  has  never  figured  as  a  provincial  tax. 

Hut  though  there  is  a  strong  resemblance  between 
the  nation.d  and  municipal  tax  systems  of  Canada, 
and  the  corresponding  systems  of  the  United  States, 
the  Provincial  and  State  systems  furnish  very  few 
real  grounds  for  comparison.  Political  conditions 
have  been  so  different,  and  customs  duties  and 
subsidies  absent  in  one  case  have  played  such  an 
important  part  on  the  other,  that  though  the  systems 
are  beginning  to  have  a  few  features  in  common, 
there  is  really,  perhaps,  no  resemblance  at  all  be- 
tween them. 

The  history  of  the  administration  of  the  direct 
taxes  in  the  municipalities  shows  two  periods ;  the 
period  of  government  by  quarter  sessions  and  the 
period  of  government  by  county  and  township 
councils,  or  the  period  of  irresponsible  and  that  of 
responsible  local  government.  Roughly,  the  dates 
of  division  are  1841,  1845,  1877  and  18  79  for  Ontario, 


nfRI'CT  TAXATION. 


Quebec,  N«»w  linmswick  iind  Nova  Soitia  and  tlu 
years  mark    thr    ll<•^4imlin^^   |)erha|)s,   of   any  really 
vi^'orous  fi;ro\vlh  of  joc.tl  taxation  an<l  municipal  life. 

The  niaritinu'  proviiues  weredivich'tl  into  counties 
and  tlu!se  sul)-dividt'il  into  townships  in  Nova 
Scotia,  and  parishes  in  New  Mrunswick.  Up|K;r 
.iiul  Lower  Canada  were  dividrtl  into  districts, 
counties  and  townships.  In  tin;  first  case  the 
county  ami  in  llu;  second  the  disirici  was  selecteil  as 
the  unit  of  local  ^fov«rnn)ent.  Within  these  ar<;a» 
the  justices  of  tin;  peace,  in  (luartcr  sessiojis  assem- 
bled, levied  county  and  township  rates  for  the 
maintenance  and  rtipairs  of  tin;  court  houst;  and  ^moI, 
the  sup|)()rl  of  |)risoners,  the  expenses  of  hoKling 
court  and  the  relief  of  the  poor,  issued  tavern 
licenses,  passed  police  regulations  ami  looked  after 
the  public  h(;allh,  and  to  some  extent  provided  for 
the  maintenanc<!  ami  repairs  of  ro.uls  and  briil^^is. 

in  New  Mrunswick  and  Nova  Scotia  the  overseers 
ot  the  poor  for  each  township  maile  an  annual 
presentment  of  the  moneys  recpiired  for  the  su|)port 
of  th(!  poor,  and  tht;  amount  was  levied  on  the  town- 
ship by  the  authority  of  the  court  of  (juarter  sessions, 
in  the  same  way  as  the  rates  for  the  county.  When 
the  care  of  the  poor  was  transferred  to  the  county, 
the  rate  became  a  county  rate.  There  seems  lo 
have  been  no  similar  rates  for  the  poor  in  Upper 
Canada  before  iS.^7. 

For  the  county  rates  the  j^rand  jury  of  the  Mari- 
time Provinces  made  presentment  of  such  sums   as 


'1 


fO  HIRK(  T  TAXATION. 

wcrt:  r('(|tiir('(l  lor  hiiildin^  and  repairing  conn  Ikmiscm 
or  ^aols  ar)>l  other  (c)unty  purposes,  aiul  the  tax 
was  levi«'il  l»y  tht;  court  ol  cpiarler  sessions.  If  the 
graiul  jury  nej{hrt«'tl  lo  make  preseiuineiu,  and  in 
Upper  and  Low(*r  Can.ula  in  the  lirst  instance,  ilu* 
jiistitt's  in  ([iiarler  sessions  w«'r«'  empowered  to 
amerce  the  comity. 

Under  this  systeni  ol  irr«'sp«»nsil)le  l«ical  govern- 
ment, taxation  was  never  dev«lop«il  lo  .my  ^;reai 
extent.  .Sonu'how  or  other  liu;  C'anadi.ui  s(|uire  «hd 
not  thrive  Wkv.  his  sturdier  I'.n^lish  prototype.  .\p- 
pointeil  hy  an  irresponsihle  and  impopnl.ir executive, 
he  frt:(|uenily  Iack<'il  the  (lualilications  fo;  piiMic 
office,  and  olien  camir  to  !)«•  re^j;ar«l<'d  as  the  incom- 
pele'il  aj^ent  ol  a  mon-  or  less  incompetent  executive. 
Hut  apart  I'rom  tiiis,  In;  himself  vv.is  not  responsil)l«! 
to  the  people,  nor  to  the  people's  re|)resent.»ti\'<'S, 
and  it  was  (|uite  natural  that  ht;  should  not  he  «  n- 
trustt'd  with  the  collection  and  e.\|)eMditure  ol  ihe 
sums  necessary  for  lar|L;c  im|)r()Vi'MU;nts.  "  Tiu' 
p(;()ple  desired  l.u'j^e  improvjincnts,  Init  lIu-)  would 
not  entrust  the  maj^ustratcs  with  the  sums  necessary 
for  duin^  lh(;  work." 

The  maxinuiin  rate  was  j^^ener.dly  fixed  at  a  piMM)' 
in  the  pouiul.  Ihe  ^ross  amount  of  all  local  taxi:s 
in  Upper  Canada  in  1811,  was  ^"4, 13^^;  in  1SJ5. 
;^ 1 0,235,  Ol*  Jihout  30  cents  i)er  h(.'ad  on  the  popula- 
tion ;  anil  in  i«S47,  under  the  District  Councils, 
;^86,058,  or  about  40  cents  per  head.  Or  better, 
the  amount  raised  by  direct  taxation  on   the  whole 


lUKK.c  r  TAXATION. 


51 


Provincr  in  1840  was  U*ss  than  DiU'Hixiiflh  part  of 
tlu'  atiuuint  levied  in  i8(;j,  or  al>oiU  ('([iial  to  the 
antount  levied  in  that  year  un  the  city  o(  Torunto 
alone. 

Where  numii:i|>al  government  was  ho  weak  the 
I.e^islatiireH  wer«'  ohli^eil  to  .kSHiime  local  hiirdens 
and  to  build  and  maintain  these  roads  and  l>rid^rc•s 
which  could  not  he  leli  to  Htatutc  labour.  I  his 
practice  «)l)taine«l  in  N'trw  lirunswick  and  Nova 
Scotia  «'ven  up  to  Conleiler.ition. 

UetWM-en  iSo.pmd  iH^^i.the  Le^dslalure  of  lJpp«T 
Canada  vote-d  altoui  /"ido.ooo  to  he  expended  hy 
connnisHion<rs  on  roads  and  hridj^es.  In  1829  a 
new  policy  was  «'nler«'d  upon  .uid  the  incorporation 
of  toll  ^aH'  compani<'H,  hridj^e  ami  harbor  comp.uiies, 
boards  of  roatl  trustees  ami  boarils  of  road  com- 
mishioners  begins. 

Dependent  for  her  customs  ntvenue  upon  the 
tariff  lej^isl.ition  of  Lower  (  anada  and  the  Imperial 
Parliament,  l-pper  Canada  is  found  makin^^  this 
attempt  to  r.iise  from  the  |)ul)Ii(:  works  the  cost  of 
their  own  construction.  Tlu;  private  companies 
were  aulhoriztiil  to  build  roads  and  bridges  and  to 
remunerat(;  tluMUselves  from  the  tolls  colUtcied,  the 
boards  to  act  as  trustees  or  agents  for  the  e\p(;ndi- 
tures  of  money  borroweil  on  provincial  credit  or  on 
the  security  of  th<'  tolls,  and  to  farm  out  the  ^ates. 
Many  of  these  companies  and  boards  wen;  created 
every  year,  and  the  acts  of  incorporation  form  the 
most   important    feature   of  the    legislation   of    the 


52 


DIRECT   TAXATION. 


( 

I  i 


province  in  the  decade  after  1829.  They  form, 
too,  the  most  important  commentary  on  the  ineffi- 
ciency of  the  municipal  institutions,  and  the  weak- 
ness of  the  revenue  system  of  the  province  at  that 
time. 

The  larger  towns  were  the  first  to  break  away 
from  the  government  by  justices  in  quarter  sessions. 
St.  Johns,  N.B.,  indeed,  had  never  been  under 
their  control.  It  had  received  its  charter  and  the 
privilege  of  electing  aldermen  in  1 785,  the  free- 
man swearing  a  queer  old  oath  "  that  he  would  be 
found  contributing  to  all  manner  of  charges  within 
the  city  ;  as  summons,  watches,  contributions,  taxes, 
tallages,  lot  and  scot,  and  all  other  charges,  and  in 
all  bearing  his  part  as  a  freeman  ought  to  do." 

The  cities  of  Quebec  and  Montreal  were  incorpor- 
ated in  1 83 1,  Toronto  in  1834,  Halifax  in  1841. 
Boards  of  police  were  established  in  Brockville  in 
1832,  Port  Hope,  Belleville,  Prescott  and  Cornwall 
in  1834,  Cobourg  and  Picton  in  1837.  In  1840  the 
Provisional  Government  established  district  councils 
in  the  Province  of  Quebec,  and  immediately  after 
the  union  they  were  organized  in  Upper  Canada. 
By  the  act  of  1849  the  present  system,  or  the  town- 
ship-county system  in  all  its  essential  features  was 
introduced  into  Upper  <.  anada,  and  practically 
completed  the  development  for  that  Province  so  far 
as  organization  is  concerned.  The  counties  of  New 
Brunswick  were  incorporated  and  received  repre- 
sentative councils  between  185 1  and  1877,  and  the 
counties  of  Nova  Scotia  between  1855  and  1879. 


! 


DIRECT   TAXATION. 


53 


These  changes  in  the  system  of  local  government, 
which  are  perhaps  not  unlike  the  change  from  uncon- 
stitutional to  constitutional  rule,  have  been  accom- 
panitjci  in  all  cases  by  a  strong  development  of 
municipal  taxation.  The  amount  of  local  taxes 
levied  in  Ontario,  which  was  ^10,235  in  1825.  and 
;^S4,i37  in  1846,  had  becom(,  $10,897,485  in  1891. 
The  rate  per  Iwixd  which  was  about  40  cents  in  1840 
had  risen  to  $4. 1 7  in  the  townships,  $5.82  in  the 
towns  and  incorporated  villages,  and  $12.36  in  the 
cities  in  1892,  And  the  rate  which  was  a  penny  in 
the  pound  in  1847,  v/as  10  mills  on  the  dollar  in 
rural  municipalities,  19^  mills  in  towns,  villages  and 
cities,  or  14^  over  all  in  1892. 

The  system  seems  to  have  worked  fairly  well. 
The  commissioners  on  municipal  institutions  in  their 
report  of  1888,  say  soberly  enough,  "In  the  course 
of  our  investigation  of  the  Ontario  system,  we  are 
forced  to  the  conclusion  that  that  system  is  now  one 
of  the  best  in  the  world,"  and  there  are  few  outside 
complaints.  A  good  local  machinery  has  been 
created,  and  in  most  cases  it  has  been  placed  in  the 
hands  of  thoroughly  competent  and  careful  men,  and 
the  results  in  the  counties  and  townships  have  not  led 
the  commissioners  to  look  forward  to  any  important 
change. 

T/ie  Assessment  Acts. — The  first  act  for  levying 
and  collecting  local  assessments  in  Upper  Canada 
was  passed  in  1793.     Under  it  the  population  was 


mm 


54 


DIRECT    TAXATION. 


divided  for  purposes  of  assessment  into  eight  classes, 
according  to  the  value  of  their  property.  In  the 
first  class  were  placed  those  persons  possessing  real 
and  personal  property  ranging  in  val  i»„  irom  ^50  to 
^100,  and  in  the  highest  class  those  persons  pos- 
sessed of  property  valued  at  over  ;^400.  The 
normal  rate  was  fixed  at  2s.  6d.  per  ^^50.  The  Act 
was  amended  in  1 794  by  the  addition  of  two  more 
classes  to  the  top  of  the  scale.  In  1795  an  Act  was 
passed  defining  ratable  property  and  fixing  a  uni- 
form valuation  for  each  description  of  property 
comprised  in  the  "Grand  List."  By  59  Geo.  III., 
c.  7,  it  was  enacted  that : 

"The  following  property,  real  and  personal,  shall  h^  deemed 
ratable  property  and  be  rated  at  the  rate  and  valiiatu  ji  :'u'rein 
set  forth,  that  is  to  say  :  every  acre  of  arable  or  ])astui .  ct  i>'  idow 
land,  20s.;  every  acre  of  uncultivated  land,  4s.;  every  to  •  lot 
situated  in  the  towns  hereinafter  mentioned,  to  wit  :  York,  King- 
ston, Niagara  and  Queenstown,  ;^5o,  Cornv/all,  Sandwich, 
Johnstown  and  Belleville  ;^2  5  .  .  .  every  house  built  with 
timlier  scjuared  or  hewed  on  two  sides,  one  storey  in  height  and 
not  two  storeys,  with  not  more  than  two  fire-places,  ;!^2o ;  for 
every  additional  fire-place,  ^£4. ;  every  dwelling-house  built  of 
squared  or  flaked  timber  on  two  sides,  of  two  storeys  in  height, 
witii  not  more  than  two  fire-places,  ;i^3o  ;  and  for  every  additional 
fire-place,  ;^8 ;  every  framed  house  under  two  storeys  in  height, 
with  not  more  than  two  fire-places,  ;£;i^  ;  and  for  every  additional 
fire-place,  ;^s  ;  every  brick  or  stone  hoube  of  one  storey  in  height 
and  not  more  than  two  fire-places,  ,£40  ;  and  for  every  additional 
fire-place,  £10;  every  brick  or  stone  house  of  one  s'orey  in  heiglit 
and  not  more  than  two  fire-places,  £40  ;  and  for  every  additional 
fire-place,  £10 ;  every  frame,  brick  or  stone  house  of  two  storeys  in 
height  and  not  more  than  two  fire-p  aces,  £60 ;  and  for  every 
additional  fire-place,  .£10;  every  grist-mill  wrought  by  water  with 


14 


DIRECT   TAXATION. 


55 


one  pair  of  stones,  .£150;  every  additional  pair,  X50 ;  every  saw- 
mill, £100 ;  every  merchant's  shop,  £200  ;  every  storehouse  owned 
and  occupied  for  forwarding  goods,  wares  or  merchandise  for  hire 
or  gain,  £199 ;  every  horse  of  the  age  of  four  years  and  upwards 
per  head,  £4;  milch  cows,  per  head,  £3 ;  horned  cattle  from  the  age 
of  two  to  four  years,  20s.;  every  close  carriage  with  four  wheels 
kept  for  pleasure  only,  X25  ;  every  cariole,  gig  or  other  carriage 
With  two  wheels  kept  for  pleasure  only,  £20;  every  wagon  kept 
for  pleasure  only,  £15." 

All  this  sounds  quaint  enough  but  it  gives  a  fairly 
f^ood  picture  of  the  economic  and  social  condition  of 
the  [)eo|)le  fc  whom  it  was  intended,  and  the  fact 
that  "the  grand  list"  figured  in  Ui)per  Canadian 
assessments  for  over  half  a  century  under  a  repre- 
sentative House  of  Assembly,  goes  to  show  that  it 
must  have  served  its  purpose  fairly  well.  Looking 
at  it  to-day,  there  seems  to  be  only  this  one  good 
feature  in  the  tax,  viz.,  that  while  the  value  of  un- 
cultivated land  was  very  much  greater  than  its 
assessed  value,  that  of  cultivated  land  showed  a  still 
greater  excess,  and  this  tended  to  discourage  specu- 
lation in  wild  lands.  In  other  respects  the  tax 
seems  crude  enough.  In  1850  Ontario  adopted  the 
general  property  tax,  and  with  the  addition  of 
certain  incomes  "  real  and  personal  property  ap- 
praised at  its  actual  cash  value,"  is  still  made  the 
basis  for  all  county,  township,  city,  town  and  village 
rates. 

Nova  Scotia  received  a  representative  House  of 
Assembly  in  1758.  By  3  and  4  Geo.  HI.  c.  vii., 
it  was  enacted  that : 


56 


DIRECT  TAXATION. 


k 

I. 


"  The  freeholders  of  any  township  where  there  are  50  or  more 
famiHes  ....  shall  choose  12  inhabitants  of  the  said 
township,  who  arc  hcrehy  empow.'red  to  as.sess  the  iniiabitants  of 
the  said  township  for  such  sum  as  shall  be  granted  by  the  .said 
freeholders  for  the  relief  of  the  poor  ....  in  just  and 
eciual  |)roportion,  as  near  as  may  be,  for  the  moneys  voted  as 
aforesaid,  and  eiic/i  person  being  assessed  according,  to  his  ktiown 
estate,  either  real  or  personal,  for  the  purpose  aforesaid." 

So  that  from  the  first  Nova  Scotia  has  had  the 
general  property  tax  for  her  township  tax.  The 
county  rate  was  levied  for  a  few  years  "In  the  justest 
manner  which  the  justices  may  devise,"  but  it  soon 
was  brought  to  a  general  property  basis,  where  it 
remains  to-day. 

In  New  Brunswick  between  1784  and  1837,  the 
asses.sors  were  allowed  to  assess  property  "  in  the 
justest  measure  they  can  devise,"  and  the  result  was 
that  the  taxes  were  levied  in  many  different  ways. 
In  i'^j7,  a  law  was  passed  by  which  one-eighth  of  the 
taxes  was  to  be  raised  as  a  poll  tax,  and  the  balance 
was  derived  from  a  tax  on  real  and  personal  estate 
and  income,  real  and  personal  property  being  assessed 
at  20  per  cent,  of  their  value,  while  income  was 
entered  at  its  full  amount.  But  irregularities  crept 
in  and  the  income  tax  became  something  of  a  farce, 
and  in  1875  it  was  decided  that  property  should  be 
assessed  at  its  actual  value.  This  gave  New  Bruns- 
wick the  general  property  tax,  supplemented  by  an 
income  tax  and  a  capitation  tax. 

The  assessment  act  of  1888  enacts  : 

"  That  for  all  purposes  for  which  local  and  direct  taxes  may  be 
levied,  all  land  and  all  such  personal   ])roperty  and  income  as  is 


DIRECT  TAXATION. 


J7 


defined  in  the  Act  shall  be  liable  to  taxation,"  and  that  "  one- 
(oiirth,  and  no  more,  of  all  local  and  direct  taxes  shall  be  l«>^vied 
and  assessed  by  an  equal  rate  as  a  poll  tax  on  all  male  persons 
living  within  the  district  and  the  other  three-fourths  shall  be 
assessed  upon  r^al  and  personal  property  and  income." 

The  assessment  acts  of  Manitoba  and  British 
Columbia  present  some  distinctive  features.  In 
Manitoba  (K.  S.,  uSqo.  s.  24)  all  lands  in  munici- 
palities improved  for  farming  or  gardening  purposes 
are  assessed  at  their  unimproved  value,  and  under 
the  act  of  April  2olh,  1892,  live  stock  and  farming 
implements  to  the  value  of  $1500  are  exempt 
from  taxation.  In  British  Columbia  there  are  differ- 
ences in  the  rate  imposed  on  real  estate  and  personal 
estate,  wild  lands  and  improved  lands,  property  and 
income,  and  under  the  Act  of  1892  the  munici- 
palities are  not  allowed  to  assess  improvements  at 
more  than  one-half  their  real  value. 

In  the  cities  the  general  property  tax,  supple- 
mented in  some  cases  by  income  and  capitation  taxes^ 
still  holds.  There  are,  however,  three  important 
exce[)tions.  In  1892  the  revenues  of  the  city  of  Que- 
bec were  derived  from  a  tax  of  75%  on  the  assessed 
value,  or  15%  of  the  rental  value,  of  real  estate,  a 
business  tax  of  12^/^%  upon  the  rental  value  of  busi- 
ness premises,  a  corporation  tax,  and  a  capitation 
tax  of  $2  per  head.  Neither  personal  property 
nor  income  was  taxed. 

In  1892,  56%  of  the  revenues  of  the  city  of  Mont- 
real were  derived  from  an  assessment  of  1°/  for  muni- 

/o 

cipal  purposes,  and  two-tenths  %  for  school  purposes 


J8 


DIKKCT   TAXATION. 


on  the  assessed  value  of  the  city  real  estate,  io% 
from  a  business  tax  of  7^%  on  the  rental  value  of 
business  premises,  25%  (rom  water  rates  of  7}4%  on 
the  assessed  values  of  occupied  houses,  and  9%  from 
markets,  police  licenses,  the  recorder's  court,  and 
miscellaneous  sources,  and  these  proportions  have 
been  roughly  maintained  ever  since  iSSo.  No 
attempt  is  made  to  tax  personal  property  or  income. 

In  Winnipeg,  too,  under  an  Act  of  the  Manitoba 
Legislature,  passed  March  iith,  1893.  p^-rsonal 
estate  has  been  exempted  from  taxation,  and  busi- 
ness taxes  and  taxes  on  corporations  provided  for. 

Following  the  line  of  development,  then,  of 
municipal  taxation  for  Ontario,  we  find  approxima- 
tions to  the  general  property  tax  in  the  class  tax 
and  the  "grand  list"  tax,  then  a  general  property  tax 
and  finally  a  general  property  tax  supplemented  by 
an  income  tax.  The  tax  systems  of  Winnipeg, 
Quebec  and  Montreal,  on  the  other  hand,  show 
attempts  to  reach  in  other  ways  the  personalty  that 
is  escaping  from  the  assessment  rolls  and  present 
possible  lines  of  future  development  for  the  tax 
systems  of  the  other  cities. 


VI. 


The   Financial  Masis  ok  Conkkdkkation.* 

Thcrfi  is  at  least  one  clause  in  the  British  North 
America  Act  that  seems  to  have  had  no  friends.  It 
reads  : 

Sec.  ii8.  The  following  sums  shall  be  contributed  by  Canada 
to  thn  several  provinces  Cor  the  sujjport  of  their  government  and 
legislatures  : 

Ontario,   I'liglity  Thousand  l>ollars; 

Quebec,  Seventy  Thousaiul  Dollars  ; 

Nova  Scotia,  Sixty  Thousand  Dollars  ; 

New  Brunswick,  Kifty 'I'housand  Dollars; 
and  an  annual  grant  in  aid  of  cac-h  jjrovince  shall  be  made  eciual 
to  eighty  cents  ])er  head  of  the  pojuilation  as  ascertained  by  the 
census  of  i86t,  and  in  the  case  of  Nova  Scotia  and  New  Bruns- 
wick, by  each  subse(]uent  decennial  census  until  the  poi)ulation  of 
<Mch  of  these  two  provinces  shall  amount  to  400,000  souls,  at 
wiiich  rate  such  grant  thereafter  remains  and  such  grants  shall  bo 
in  full  settlement  of  ail  future  demands  on  (Canada." 

Those  who  have  written  from  the  standpoint  of 
political  science,  having  the  constitution  of  the 
Ignited  States  in  view,  point  c-ut  that  it  is  desirable 
that  the  financial  systems  of  the  provinces  should  be 
entirely  independent  of  the  Dominion  financial 
system.  Those  who  take  "  provincial  rights  "  as  a 
starting  point  have  shown  that  it  does  not  secure 
absolute  justice  as  between  province  and  province, 
while  those  who  look  on  the  financial  side  of  the 
question  have  thought  that  the  system  of  provincial 


*  Gra/'s  Confederation. 
The  Confederation  Debates. 


59 


6o 


TIIF,    FINANCIAl,   HASIS   OF  CONFKDKRATION. 


subsidies  throws  too  great  a  burden  u[)on  Dominion 
customs'  duties,  a  burden  which  could  not  be  sus- 
tained in  the  event  of  an  inJierruption  of  commerce 
or  an  unforseen  increase  in  the  ex|)enditures  of  the 
Dominion.  In  other  words,  it  is  heKl  to  be  danger- 
ous to  settle  so  heavy  a  fixed  charge  upon  revenue* 
so  liable  to  fluctuation. 

The  present  essay,  skt^tching  lightly  the  history  of 
the  financial  arrang(;ments  of  Confederation,  may  first 
perhaps  1)(;  made  to  sugj^est  an  explanation  of  th(; 
origin  of  this  clause,  and  to  indicate  the  outlines  of 
a  relative  justification  on  strictly  I'rovincial  grounds, 
and  secondly,  perhaps,  to  call  up  those  circumstances 
which  lead  to  the  first  readjustment  of  the  original 
inter-provincial  arrangement,  and  caused  the  question 
of  Provincial  subsidies  to  assume  its  present  form. 

The  Act  of  Union  by  substituting  a  legislative 
union  for  a  customs  pool,  and  by  settling  her  debt 
up(jn  the  consolidated  fund  of  the  united  IVovince, 
had  freed  Upper  Canada  from  the  financial  difficulties 
of  1839.  The  act,  however,  provided  that  Upper 
and  Lower  Canada  should  be  represented  in  the 
Legislative  Assembly  by  an  equ.d  number  of  mem- 
bers, and  this  arrangement  could  not  be  altered 
except  by  an  impossible  two-thirds  vote  in  the 
assembly  and  the  council.  The  more  populous 
Province  had  always,  therefore,  a  grievance. 

Upper  Canada  seems  to  have  remained  quite 
satisfied  with  the  arrangement  for  equal  representa- 
tion so  long  as  her  population  was  not  equal  to  that 


^1 ' 


THK    IINAN(  lAl.   HASIS  OK   CONKKDKUATION.         6| 

of  the  Lower  Province  and  the  halance  was  In  her 
favor,  hill  when  the  incntase  in  inimij^^ration  after 
th('  year  1H45  hail  carried  !ier  [)o|)iiIati()n  consider- 
ably in  advance  of  her  yoi«vniate  the  burden  f)f 
complaint  was  shifed.  I'Voni  this  time  lorward 
"  Represt'ntation  by  popiiiation  "  came  to  be  the 
mcjtto  of  the  majority  of  the  members  from  Canada 
West. 

This  means  of  course  that  i  n^y  biiHeved  that 
their  part  of  the  Province  was  not  gettin;^^  its  fair 
shar(!  in  the  division  of  the  revenu(;s,  and  that  the 
local  burdens  of  Canada  I'^ast  were  beinj,^  allowed  to 
prt^ss  too  heavily  on  the  central  government.  As 
this  feeling  grew  strong(;r,  party  divisions  became 
more  and  more  sectional,  until  nearly  the  whole 
western  contingent  came  to  be  massed  against  the 
sul)stantially  solid  vote  of  the  east.  In  such  a  state 
of  affairs  it  was  impossible  for  any  administration  to 
secure  a  permanent  working  majority,  and  govern- 
ment was  rapidly  becoming  impossible. 

Though  an  advance  upon  the  i)revious  arrange- 
ment, the  Union  had  been  unfair  from  the  first,  and 
from  being  unfair  was  l)ecoming  unworkable  and 
something  had  to  be  done.  And,  just  as  in  1S39 
Upper  Canada  had  acquiesced  in  the  Union  because 
it  promised  to  free  her  from  difficulties  in  connection 
with  the  collection  of  revenues,  so  after  1S58,  she 
began  to  look  forward  to  another  political  change,  by 
which  she  might  secure  a  fair  share  in  their  distribu- 
tion.      To    this    extent,    the    movement    for    Con- 


( 


f^^ 


TMK   FINANCIAI-   HAStS  OK  C'ONKKDHKATION. 


V 


■J 


fc'cliraiion  may  be  Haiti  in  liavc  iJiocctnlcil  from 
Canada  \Vt!sl.  A  n<:w  Union  was  ca^'crly  sought 
when  llu'  olil  was  no  lonj^n-r  supporlaMc  ;  tin;  yokt: 
of  lh«'  old  prcsscti  heavily,  the  l)iird<'M  of  the  new 
promised  lo  \w  somewhat  more  c'vcnly  ilislrihuled. 
VVlifdier  or  not.  it  would  he  possihli;  under  tht;  terms 
of  the  new  Union  to  secure  ahsoluie  justice  as 
helwc  en  Province  and  Province,  thert;  was  at  hsist  a 
chance  that  Canada  West  would  ohtain  a  consider- 
ahle  advance,  and  it  was  in  this  exptxiation,  perhaps, 
that  her  i.'pres<MUati\cs  appear'd  at  the  (Juehec 
Conference. 

In  determining^  the  relations  that  should  (;xist 
between  the  Dominion  Ciovernment  and  the 
governments  of  the  provinces  and  between  the 
executives  aiul  the  legislatures,  the  dile^ates  from 
the  differ(;nt  provinces  at  the  Ouebec  Conference 
had  a  comparativiily  easy  task.  They  kept  in  mind 
tin:  constituti(jn  and  history  of  the  United  .States, 
and  th(;y  drew  from  tlurir  own  twenty  years  experi- 
ence in  the  workings  ot  Parliamentary  Govern- 
ment. 

The  financial  ([uestion,  however,  presented  a  real 
dit'tknilty,  arising  partly  from  the  prominence  of  the 
part  that  hatl  been  assigned  to  customs  in  provincial 
systems  of  revenue,  and  partly  from  the  weakness 
of  the  municipalities  and  the  feeble  growth  of  direct 
taxati(3n  in  the  maritime  provinces  and  Quebec. 
How  were  the  ex[)enses  of  the  i)rovincial  govern- 
ments to    be   met   when    the    customs    duties    from 


/ 


TIIK    KINANCIAI,   HASIM  oK  CONKKDKKATION. 


^5 


whitili  tfu'V  (U'rive-d  from  thrrc  titihs  to  foiir-lifths  of 
ffUire  rt:vt'iuu's,  had  boon  iransfcrrcil  lo  thf  i;i;niral 
govt'rnmtnt  ? 

The  npri'stMil.ilivtrs  from  Uppt-r  Canada  having 
ill  mind  ihi;  lax  systems  of  the  Nt;w  luiglaiul  anil 
middle  State!S  proposed  that  each  |>rovincc'  sht)iild 
be  obhi^nd  to  me«'t  its  own  local  e.\p«'ni!iliirt:  by 
resoriin)^^  todinct  taxation.  This  meant  the  adoption 
of  the  j^eneral  property  tax  as  a  provincial  lax  an 
innovation  even  tor  I'ppcr  Canada,  and  out  of  the 
«|ii<'siion  for  tilt;  other  three  provinces  vvh<'re  the 
mimicipaiities  still  Ksined  heavily  on  tile  proxincial 
treasury,  and  direct  taxation  had  been  \'ery  slii^hliy 
d(n'eloped.  So  the  plan  b\'  uliith  the  pro\inces 
woulil  havt:  been  obliged  lo  fall  back  on  ilirect 
taxation  and  dev<;lop  tin;  jjjeiier.d  property  tax  as  the 
Stales  had  done  alter  i  7S9  was  abandoned. 

It  was  then  proposed  that  iIk;  revenues  lo  he  raised 
by  the  IJominion  by  excise  duties  on  tobacco  and 
spirits  should  be  re-conveyed  to  the  us(;s  of  the  pro- 
vince on  which  they  were  levied.  By  this  arrange- 
ment it  was  hoped  to  retain  a  local  basis  ant!  a 
measure  of  indt^pemience  for  the  revenue  systems  of 
the  provinces.  In  the  Canadas  the  revenues  arising 
from  these  sources  w(;re  more  than  sufficient  for  the 
support  of  the  provincial  governments,  but  in  iIk; 
maritime  provinces,  where  the  peopU:  did  not 
manufacture  spirits  to  any  great  extent,  the  excise 
duties  were  not  productive,  and  thus  this  plan  also, 
the  last  which  would  give  a  local  character  to  tii<_ 
revenue  systems  of  the  province,  was  given  uj). 


TIIK   riNAN<l,\l,    IIASIH  OK   (ONKKDI 


'i 


Fin.illy,  hoiiu-  om-  luiviny;  in  tuiiul  possihly  tin- 
finaiuial  reilaiioiis  lK;iwtt'ii  tin*  (<iitral  ^ovrruinrut 
aiui  thr  nuiMi('i|»aliti(.'H  in  i'!ti);l.in(l  HU^'^('stc<l  Ow  idea 
of  subsidicrs,  It  was  proposed  that  th«>  I  )oniiiiion 
should  pay  over  to  the  provinces  a  lixt;il  annual 
suhsidy  lor  purpost's  of  j^ovt-rnincnt. 

Thfrt:  was  stronj^  opposition  l)oih  to  the  principle 
and  on  matters  of  detail,  "  agrtuMnent  seenud  hopc- 
l(;ss,  .uul  on  or  aljout  the  tenth  morning  after  tht; 
convention  met  the  conviction  was  ^enttral  that  it 
must  break  uj)  without  coming  to  any  conclusion. 
The  terms  of  mutual  conci^ssion  and  cicmand  had 
been  drawn  to  their  extntnurst  tension  and  silence 
was  all  arouml.  At  last  a  projtosition  was  made 
that  the  convention  should  iuljouni  for  a  day  and 
that  in  the  meantimi;  finance  ministers  of  tlu;  si;veral 
provinces  should  meet,  discuss  th(!  matter  amon^r 
themselves,  and  see;  if  they  could  not  aj^ree  upon 
someihinj;.  On  the  followiii^^  mc.rninj,' they  n-porled 
the  conclusions  at  which  they  had  arriv(;d.  I  lu;sc 
with  souk;  modilications  were;  ultimately  adopted  by 
the  conv(Mition,  reduced  to  resolutions,  and  the 
'financial  crisis'  passed  away." 

The  tinance  ministers  had  ;^one  to  work  !))■  dividing' 
up  the  tiebt  of  Canada  into  five  millions  of  local  ilebt 
connected  with  local  assets  to  be  retained  by  the 
Province,  and  sixty-two  and  a  half  millions  of  jj^en- 
<;ral  debt  to  Ih:  assumed  by  the  Dominion,  together 
vr-ith  all  assets  connected  therewith.  This  last 
amounted  to   about  $25  a    head    on    the  people  of 


;*V 


A 


^ 


riir.   FINANCIAL  UASIH  OV  CONKKDKHATIUN. 


6$ 


Canada,  ami  thr  cIcIjih  of  the  othrr  Provincos  were 
levrllrd  dp  ((>  that  avcTa^r ;  Nova  Scotia  Ix-in^ 
allowtrd  to  hrin^  in  cij^ht  tnillions,  and  New  hrun!i- 
wick,  Mi'V(*n  inillions  of  debt. 

The  ttHtiiu.itc:  for  thr  annual  Huhsidy  was  founded 
on  th«:  wants  of  Nova  Scotia.  Aftttr  scalinj^  down 
the  local  (  x|i<i)diturc-  of  this  Province  it  was  found 
that  they  still  exctnled  the  local  rev«MUies  hy  $264,0(x), 
or  hy  .ui  amount  e<|uai  to  Ho  cents  ptir  heail  on  the 
|M)pulation.  Accordingly  it  was  deciiled  that  each 
(»f  the  Provinces  should  receive  an  annual  subsidy 
from  tlu;  Dominion,  amounlin^  to  ei^dity  cents  per 
heati  on  ihe  populatif)n  of  the  "rovinc**.  However, 
in  order  todiscouraj^e  extravagant;  in  the  provincial 
legislatures,  and  to  (ix  a  limit  to  the  liability  which 
was  to  be  assumed  by  the  I  N)minioii,  it  was  provided 
that  the  calculation  of  the  subsidies  should  bt:  based 
<m  the  population  in  iS6i.  Thus  the  resolutions  of 
the  (Quebec  conleriMicc  ran  : 

6i.  I  he  debt  <»f  Cunatl.i,  not  specially  aHHuiiicd  by  Upper  and 
Lower  Can.i<l a  respc'(  tivt-ly,  shall  not  <'X(Oi'(l  at  the  time  of  the 
union  $62,500,000  ;  Nova  Scotia  shall  enter  the  Union  with  a 
debt  not  exceeding  $S, 000,000,  and  Ncsv  Drunswick  with  a  debt 
nut  exceeding  $/,ooo.ooo. 

64.  In  considerati(jn  of  the  transfer  to  the  general  parliament 
of  the  powers  of  taxation,  an  annual  grant  in  aid  of  each  province 
shall  be  made,  ecpial  to  eighty  cents  per  head  of  tho  po|)ulation, 
as  established  by  the  census  ol  1861.  .  .  .  Such  aid  shall  be 
in  full  settlement  of  all  tuture  demands  upon  the  general  govern- 
ment for  local  |)urposes,  and  shall  bo  i)aid  half-yearly  in  advance 
to  each  province. 

Thus  far  all  lour   provinces    were  on  the  face  of 


66 


rilK    FINANCIAl-    HASIS  OF   CuNFEDKKATION. 


the  resolutions  at  least  to  be  placed  on  an  equal  foot- 
ing. A  special  clause,  however,  was  introduced  in 
favour  of  New  Brunswick. 

65.  The  position  of  New  Urunswick  being  such  as  to  uiuail 
large  immediate  cliarges  upon  her  local  resources,  it  is  agrccil  that 
for  the  period  of  ten  years  from  the  time  when  the  union  takes 
effect  an  additional  allowance  of  $63,000  per  annum  shall  he 
made  to  that  i)rovince.  But  that  so  long  as  the  liability  of  that 
l)rovince  remains  under  $7,000,000  a  deduction  e(iual  to  the  in- 
terest on  such  deficiency  shall  be  made  from  the  $63,000. 

In  the  Canadas,  the  resolutions  of  the  conference 
seem  to  have  met  with  a  pretty  general  acceptance, 
but  they  encountered  such  a  storm  of  opposition 
and  criticism  in  the  maritime  provinces  during  the 
two  years  that  followed,  that  when  the  representa- 
tives of  Canada,  New  Brunswick  and  Nova  Scotia 
met  in  London,  in  November,  1866,  the  prospect  of 
confederation  was  gloomy  enough.  It  was  evident 
that  something  must  be  don^.  to  meet  the  reasonable 
objections  of  Nova  Scotia  and  New  Brunswick. 
Even  in  the  Quebec  conference  it  had  been  foimd 
to  be  impossible  to  hold  the  balance  between  pro- 
vince and  province  exactly  even,  and  now  it  was 
clear  that  further  concessions  were  necessary  to 
secure  the  adherence  of  Nova  Scotia  and  New 
Brunswick,  concessions  which  were  acquiesced  in  by 
the  representatives  of  Upper  Canada  as  the  neces- 
sary price  of  release  from  the  accumulating  difficulties 
of  the  union  then  existing  with  Lower  Canada. 
Accordingly,  the  resolutions  of  the  Quebec  con- 
ference were  modified  in  two  ways  : 


'(.I 


TIIK   FINANCIAL   MASIS  OF  CONFKUKRATION. 


67 


1.  Uy  giving  an  increased  subsidy  in  addition  to  the  eighty 
cents  a  head  of  $80,000,  $70,000,  $60,000  and  $50,000  to  U|)pcr 
Canada,  Lower  Canada.  Nova  Scotia  and  New  Brunswiclc  re- 
spectively, amounting  to  al)out  5  cents,  6  cents,  18  cents  and  19 
cents  per  iiead  on  the  population. 

2.  By  extending  the  capitation  subsidy  of  82  cents  in  both 
New  Hrunswick  and  Nova  Scotia  until  the  population  reached 
400,000. 

With  these  modifications  the  resolutions  were 
made  the  basis  of  the  British  North  America  Act. 

So  that  it  would  seem  that  the  explanation  of  the 
financial  clauses  of  the  British  North  America  Act 
is  to  be  sought  in  the  history  of  the  tax  systems  of 
the  provinces  up  to  the  time  of  Confederation,  and 
the  history  of  the  develojjment  of  responsible 
government  and  direct  taxation  in  the  municipalities 
— and  that,  given  certain  provincial  tax  systems  and 
given  a  certain  development  of  the  municipalities, 
given,  too,  the  dread  of  direct  taxation  resulting  there- 
from, and  the  absence  of  any  compelling  political 
motion,  the  system  of  subsidies  to  the  provinces 
agreed  on  in  the  Quebec  conference  was  as  nearly 
as  possible  inevitable,  and  if  such  things  be,  may  be 
set  down  as  a  historical  necessity — that  taking 
[)opulation  as  a  standard,  it  was  found  necessary  to 
depart  from  it  almost  immediately  by  basing  the 
subsidies  on  the  population  of  1861,  and  giving  an 
additional  grant  to  New  Brunswick,  and  that  a 
further  departure  was  made  in  giving  lump  sums  to 
the  provinces  for  purposes  of  government  and 
extending   the  population    basis    for   the  capitation 


68 


THE   FINANCIAL    BASIS   OF   CONFKDEUATION. 


subsidy  to  400,000  for  New  Brunswick  and  Nova 
Scotia  first,  and  Manitoba,  Uritish  Columbia  and 
Prince  Edward  Island  later — that  these  changes 
have  not  been  favourable  to  Quebec  and  Ontario, 
but  have  been  acquiesced  in  by  the  former  because 
they  brought  with  them  a  workable  government,  and 
agreed  to  by  the  latter  as  the  price  to  be  paid  for 
control  over  her  own  expenditures. 

Better  Terms. — The  financial  arrangement  estab- 
lished by  sections  102  to  1 19  of  the  British  North 
America  Act  was  without  doubt  regarded  as  final  and 
unalterable.  The  subsidies  there  provided  for  were 
"  to  be  in  full  setthvient  of  all  future  demands  itpon 
Canada."  But  it  soon  appeared  that  this  expecta- 
tion was  not  to  be  fulfilled. 

The  people  of  the  Lower  Provinces  had  never 
been  enthusiastic  for  union  with  the  Canadas  and  it 
was  only  after  several  political  contests  that  the 
unionists  secured  a  majority  in  the  New  Brunswick 
Legislature.  In  Nova  Scotia  the  position  was  still 
worse.  The  union  had  there  been  accepted  by  a 
legislature  elected  upon  different  and  less  important 
issues  No  sooner  had  the  people  a  chance  to  pro- 
nounce upon  the  scheme  than  public  opinion  was 
found  to  be  overwhelmingly  against  it.  The  repealers 
obtained  a  large  majority  in  the  new  legislature. 
Repeal  associations  sprang  up  in  all  parts  of  the 
province.  The  members  of  parliament  from  Nova 
Scotia  came  to  Ottawa  as  enemies  to  look  on  and 
protest  rather  than  as  friends  to  assist  in  the  organ- 


r 


r 


T 


THE    FINANCIAL   BASIS  OF  CONFEDERATION.         69 

ization  of  the  new  government,  and  their  most 
inHiiential  leaders  refused  office  in  the  federal 
administration.  Nova  Scotia  considered  herself  to 
have  been  unfairly  treated  in  the  matter  of  public 
revenues,  to  have  been  made  a  party  to  an  unfavor- 
able bar^rjiin  without  her  own  consent. 

It  was  claimed  in  the  first  place  that  the  financial 
arrangements,  the  assumption  of  debts  and  the 
granting  of  subsidies,  should  not  have  been  based 
entirely  upon  population,  but  that  the  amount  of 
revenue  contributed  by  each  province  should  have 
been  considered.  The  imports  of  Nova  Scotia 
in  1866  amounted  to  $39.37  per  capita,  while 
those  of  Canada  amounted  only  to  $1938. 
The  per  capita  duty  paid  by  Nova  Scotia  was 
$3.76,  by  Canada  only  $2.92.  In  the  assimilation 
of  tariffs,  moreover,  that  of  Nova  Scotia  had  been 
raised  from  10  per  cent,  to  15  per  cent,  while  that  of 
Canada  had  been  lowered  from  20  per  cent,  to  1 5 
per  cent ;  and  other  taxes,  such  as  excise  and  stamp 
duties,  etc.,  had  been  added,  which  to  Nova  Scotia 
had  hitherto  been  almost  unknown.  Even  in  the 
application  of  the  principle  of  population  it  was 
claimed  that  Nova  Scotia  had  been  allowed  a  smaller 
debt  per  head  than  any  other  province. 

In  the  second  place  it  was  maintained  that  the 
Upper  Provinces  had  been  allowed  to  retain  valuable 
assets  which  would  yield  a  large  revenue,  while  Nova 
Scotia  possessed  no  property  of  a  corresponding 
value.       It    therefore    resulted    that    whereas    the 


/ 


II 


70 


THE   FINANCIAL   BASIS  OF   CONFEUEKATION. 


revenues  of  Ontario  and  Quebec  for  local  purposes 
would  be  largely  increased  by  the  new  arrangement, 
those  of  Nova  Scotia  would  be  so  much  decreased  as 
to  make  it  imi)ossible  for  her  to  meet  her  local 
expenditure    without    a    resort    to    direct    taxation. 

Had  she  remained  out  of  the  union  and  increased 
her  tariff  to  15  per  cent,  she  would  have  been  able 
to  meet  all  the  expenses  of  government  and  local 
improvement  and  enjoy  an  actual  surplus  in  reduction 
of  debt.  Still  further  it  was  pointed  out  that  the 
other  provinces  had  ceased  to  expend  anything  upon 
public  works  immediately  after  the  Quebec  Resolu- 
tions were  adopted,  while  Nova  Scotia  had  continued 
her  expenditure  in  this  way  to  such  an  extent  that 
her  debt  had  been  doubled  between  1864  and  1867, 
and  the  works  themselves  were  to  be  transferred  to 
the  Dominion.  She  had  been  allowed  to  bring  into 
the  union  a  nominal  debt  of  only  $8,000,000.  Her 
actual  debt  had  now  reached  the  sum  of  $9, 1 80,000, 
and  the  interest  on  the  excess  would  be  deducted 
from  her  subsidies,  already  much  too  small  to  support 
her  government.  There  was  therefore  nothing  for 
Nova  Scotia  to  do  but  to  adopt  direct  taxation,  or  to 
get  better  terms  from  the  Dominion,  thus  breaking 
through  the  settlement  of  1867,  or  to  withdraw  from 
the  union  altogether.  The  latter  could  not  be  done 
without  the  assent  of  the  Imperial  Government 
which  had  declared  that  confederation  was  "  impor 
tant  to  the  interests  of  the  whole  Empire."  Direct 
taxation  had  been  continually  set  aside  and  the  only 


TIIK    KINANflAL    HASIS  OF   CONFEDERATION. 


71 


other  solution  was  to  rearrange  the  financial  terms  of 
the  union. 

Thfi  Dominion  Government  recognized  the  sub- 
stantial justice  of  the  claim  and  decided  to  grant 
some  relief  Parliament  was  ask'jd  to  pass  an  Act 
providinji^  that  Nova  Scotia  should  be  considered  to 
have  entered  the  Union  with  a  debt  of  $9,188,756 
(that  is,  at  $27.77  a  head,  as  in  the  case  of  New 
Brunswick)  antl  should  receive  (again  as  in  the  case 
of  New  Brunswick)  an  exceptional  subsidy  for  ten 
years  in"^'  her  local  sources  of  revenue  could  be 
developed.  The  debates  upon  this  measure  in  the 
Dominion  Parliament  in  1869  and  1870  show  that 
the  importance  of  the  question  was  mainly  constitu- 
tional If  Confederation  was  a  compact  between 
the  provinces  confirmed  by  Imperial  Act,  could  the 
Dominion  Parliament  alter  the  terms  of  that  agree- 
ment ?  Was  a  "  strict  construction  "  or  a  liberal  one 
to  be  placed  upon  the  B.N. A.  Act,  1867  .!*  Upon 
this  qu-istion  political  parties  divided. 

Mr.  Blake  declared  that  the  Government  was 
"asking  this  Parliament  to  claim  the  right  of  amend- 
ing the  Imperial  Act  and  saying  that  such  and  such 
figures  should  stand  for  certain  other  figures  in  that 
Act";  that  "  the  conditions  of  the  Union  effected  by 
this  Act  were  not  amendable,  repealable  or  alterable 
by  this  Parliament  except  in  so  far  as  by  the  Union 
Act  power  was  given  so  to  do.  Was  it  to  be  sup- 
posed that  any  of  the  provinces  would  have  consented 
to  surrender  their  rights  as  independent  provinces 


{ 


li 


72 


THE   FINANCIAL    HASIS  Of   ^ONIKDIRATION. 


' 


if  they  imagined  that  the  conditions  of  the  Union 
should  be  alterable  at  the  will  of  this  Parliament  ? 
.  .  .  What  Parliament  did  on  that  occasion  it 
may  at  soi.:e  future  time  undo.  The  adtlitional  sub- 
sidy g'  /en  to  Nova  Scotia  did  not  rest  upon  the 
same  secure  basis  as  the  original  subsidy  provided 
for  in  the  Union  Act."  "This  Constitution  is  a  com- 
pact between  the  provinces,  and  the  Imperial  Act 
expressly  states  that  its  object  is  to  ratify  that  treaty 
.  .  and  it  is  a  manilest  breach  of  that  partner- 
ship for  this  Parliament  Lo  interfere  and  take  the 
common  stock  to  apply  to  local  purposes  not  common 
to  the  whole."  "  By  the  assumption  by  the  i  arlia- 
ment  of  Canada  of  the  power  claimed,  the  former 
evils  so  far  from  being  removed  by  Confederation 
will  be  intensified,  the  just  expectations  of  the  peoi)le 
will  be  disappointed,  sectional  strife  will  be  aroused, 
the  Federal  i)rinciple  will  be  violated,  and  the  con- 
stitution will  be  shaken  to  its  base." 

Sir  John  Macdonald,  more  inclined  to  extend  the 
powers  of  the  central  government,  and  therefore  to 
construe  the  constitution  more  broadly,  declared  that 
"the  House  had  still  the  power  of  spending  its  money 
as  it  saw  fit.  It  had  a  right  to  do  what  it  liked  with 
its  own ;  to  raise  such  revenues  as  it  thought  proper, 
to  expend  that  money  as  it  thought  proper,  and  to 
misuse  it  if  it  thought  proper.  No  auth(jrity  could 
prevent  it  and  it  would  be  an  infringement  of  the 
principles  of  responsible  government  if  the  case  were 
otherwise.  The  British  North  America  Act  con- 
tained the  same  words  as  did  the  Act  of  1791,  which 


k^'t^ 


I* 


\i 


THK   FINANCIAL   HASIS  OF   CONFF!)|iRATION. 


7Z 


T  ?/ 


conferred  upon  the  province  of  Upper  Canada  the 
power  to  deal  with  "the  peace,  order  and  j^ood 
government  of  the  province."  The  law  officers  of 
the  Crown  in  Ivngland  concurred  in  this  view  ;  nd 
held  that  the  power  to  ^rant  additional  subsidies  was 
implied  in  the  91st  section  of  the  li.N.A.  Act,  which 
enacted  that  "it  shall  be  lawful  for  the  "'irlianient  of 
Canada  to  iiiak(!  laws  for  the  peace,  otqU.:  and  good 
government  of  Canada  in  relation  to  all  matters  not 
coming  within  the  classes  of  subjects  by  this  /\ct 
exclusivi:ly  assigned  to  the  legislatures  of  the 
provinces." 

The  bill  therefore  passed,  and  the  first  break  was 
made  in  the  "full  settlement;"  but  Nova  Scotia  was 
reconciled  to  the  union. 

As  regards  the  legal  question  involved  in  diis 
proceeding,  while  there  can  be  little  doubt  that  the 
frame!  s  of  the  constitution  intended  to  close  the 
door  to  all  future  grants  from  the  federal  trea.^ury,  it 
is  also  plain  that  such  grants  had  not  been  expressly 
forbidilen,  and  that  the  language  of  the  91st  section 
is  open  to  the  more  liberal  construction.  But  aside 
from  this,  it  is  difficult  to  underst'\nd,  when  the 
federal  government  had  been  made  the  chief  source 
of  provincial  revenues  and  the  most  intricate  finan- 
cial relations  had  been  established  between  the 
Dominion  and  the  provinces,  how  any  constitutional 
restriction,  however  carefully  worded,  could  have 
prevented  the  Dominion  government  from  depart- 
ing in  some  way  or  other  from  the  original  arrange- 


74  TIIK   I'INANC  lAL   BASIS  OF  CONKKDEKATION. 

mv.m  and  oxpending  its  revenues  as  the  interest  of 
tl  e  country,  as  a  whole,  seemed  to  it  to  require. 

F'roin  tiiis  time  forward,  that  is,  from  the  time 
when  Nova  Scotia  ceased  to  ajj^itate  for  a  repeal  of 
the  iiritish  North  America  Act,  1S67,  and  gave  in 
her  assent  to  the  union,  and  from  the  time  that  it 
was  decitled  that  the  Dominion  (iovernment  had  the 
power  to  alter  thi;  I'mancial  arrangemtMits  of  Con- 
federation, founded  in  inter-provincial  agreement,  in 
favour  of  any  of  the  provinces,  a  new  element  ente'-s 
into  the  (|uestion  in  the  shape  of  ihe  new  Dominion, 
and  the  ([uestion  of  provincial  subsidies  ceases  to  Le 
a  purely  inter-provincial  question, 

The  financial  arrangements  between  the  Dominion 

and    the    provinces    of    Manitoba,    Prince    Hdward 

Island   and    British  Columbia,   the    increase    in    the 

subsidies  in  1873  and    1884  would  seem  to  be  best 

approached  from    a   standpoint   not   provincial    but 

extra-provincial  or  national. 

'Ihe  Act  of  May  23rd,  1873,  raised  the  amount  of  debt  which 
Ontario  and  Quebec  jointly  were  allowed  to  bring  into  Confedera- 
tion from  $62,500,000  to  $73,006,088.84,  ;ind  increased  the 
amounts  of  debt  allowed  New  Brunswick  and  Nova  Scotia  in 
proportion.  The  Act  of  April  19th,  1 884,  made  the  increase  of 
2873  date  from  date  from  July  ist,  1867,  thus  raising  the  amounts 
due  to  the  different  Provinces  as  follows  : 

Yearly  Increase.  Capital. 

Ontario  and  Quebec  jointly $269,875.16  $5-397. 503- '3 

Nova  Scotia 39,668.44  793.368.71 

New  Brunswick  30,225.97  604,519.35 

Manitoba 5.551-25  110,825.07 

British  Columbia 4>' 55-39  83,107.88 

Prince  Edward  Island 9,148.68  182,973.78 


(, 


THF-:  riNANClAf,   [JASIS  OF  CONFEDKRATION. 


75 


\ 


i 


hy  the  act  of  ajrd  May,  1893,  it  was  provided  that  Now 
llrunsvvick  receive  an  additional  annual  subsidy  of  $1  subsidy  of 
$150,000  on  fdudiiion  that  all  provincial  duties  on  lumber 
exported  from  tliat  province  be  repealed. 

The  Dominion  Act  of  1870  erecting  the  new  province  of 
Manitoba  provided — i.  that  as  the  province  was  witliout  debt  it 
should  be  entitled  to  receive  interest  from  the  I  )oii>inion  at  five 
per  ( ont.  on  the  sum  of  $47^,090,  that  is,  should  be  allowed  to 
bring  in  a  nominal  debt  estimated  at  $27.77  P^-t  hea  of  the 
|)opulation,  thus  placing  her  upon  the  same  footing  as  Nova  Scotia 
and  New  Urunswick.  2.  That  an  annual  lump  sum  of  $30,000 
and  .m  annual  grant  of  eighty  cents  per  head,  increasing  with 
population  until  this  should  reach  400.000,  should  be  |)aid  by  the 
Dominion  for  the  sui)port  of  '.he  (lovernment  and  Legislature. 
This  was  declared  to  be  "in  full  and  final  settlement  of  all  future 
claims  upon  Canada."  Hy  an  Act  of  1876  an  additional  annual 
grant  of  $26,746,96  was  allowed  Manitoba  for  six  years,  raising 
the  total  subsidy  to  $90,000  a  year.  My  an  Act  of  1879  another 
additional  grant  of  $15,653.04  was  allowed  for  two  years. 

An  .Act  of  iSS-*  ef. .  :ted  a  'omplete  rearrangement  of  the 
financial  relations  between  Manitoba  and  the  Dominion.  A  lum|) 
sum  of  $50,000,  a  grant  of  eighty  cents  per  head  on  a  population 
of  150,000  ($120,000)  and,  as  the  Dominion  had  retained  under 
her  own  control  the  public  lands  of  Manitoba,  the  sum  of  $45,000 
a  year  in  lieu  of  revenue  therefrom,  were  to  be  paid  to  Manitoba, 
for  the  period  of  ten  years.  Before  this  period  elapsed  the  act  of 
1885  explained  by  that  of  1886  provided  that  the  indemnity  in  lieu 
of  public  lands  should  be  increased  to  $100,000  per  annum.  'l"he 
lumj)  sum  of  $50,000  a  year  was  to  continue.  The  per  capita 
allowance  of  eighty  cents  pel  head  on  a  minimum  population  of 
1 50,000  was  to  be  increased  every  five  years  proportionately  to 
population  until  this  should  reach  400,000.  The  nominal  debt 
upon  which  Manitoba  was  to  receive  interest  from  Canada  was  to 
be  calculated  on  a  population  of  125,000  instead  of  17,000  as 
provided  in  ihj  act  of  1870.  These  sums  were  once  more  "to 
be  in  full  settlement  of  all  questions  and  claims  discussed  between 
the  Dominion  and  Provincial  Governments  «/  fo  1883." 


7<5 


rUF.    FINANCIAL    HASIS  OF   C  Oil FKDr.kATiDW. 


li 

ii 


In  1871,  Hritifih  (.'oluml)i.-i  entered  the  union  under  an  aK''t*'*'^ 
incnt — I.  That  the  debt  nllowanre  be  $a7.77  on  11  population  of 
60,000.  3.  That  nn  unnual  Nubtiidy  of  $35,000  und  an  unnuati 
^rnnt  of  80  cents  per  head  on  a  {M)])iilation  ol  60,000  be  paid  by  the 
hiiiiiinion  in  support  of  itx  government  and  legiHlature,  nu<  h 
grant  to  increase  as  in  tim  caHcs  of  Nova  Scotia  and  New  HruiiH- 
wick.  3,  That  in  return  for  the  public  landH  to  Ik  conveyed  by 
the  piovincc  in  aid  of  the  construction  of  the  Canadian  Pacific 
Railway,  an  additional  annual  subsidy  of  $100,000  be  piid  by 
the  Dominion. 

In  1873  Prince  ICdward  Island  entered  Confederation  under  an 
agreement,  i.  Tiuit  the  debt  allowance  be  $50  per  head  on  the 
population  of  1871  or  $4,701,050.  2.  That  the  Dominion  pay  a 
subsidy  in  support  of  government  of  $30,000  annually  and  an 
annual  grant  equal  to  80  cents  per  he.id  on  the  |)opulalion  of 
1871,  such  gr.mt  to  increase  witii  increase  of  population,  as  in  the 
cases  of  Nova  Scotia  and  New  Urunswick.  3.  That  in  the 
absence  of  provincial  revenues  arising  from  public  lands  an 
additional  annual  subsidy  of  $45,000  be  paid  by  the  I)r)minion. 
The  act  of  June  23rd,  1887  provided  that  I'rince  Kdward 
Island  should  receive  an  additional  annual  subsidy  of  $20,000. 
from  the  Dominion. 


The  followinjT  i^<  a  Htatcmint  of  the  etlucational  insti- 
tutions attended  and  the  defrrcen,  etc.  received  by  the 


writer 


^^'^^     The     Collegiate     Institute.     Strathrny, 

Ontario;  rSSS-i.Sf,2  University  Colk-pfe,  Torr)nto  ;  1S92- 
1S94  Coliiinbia  ColJcjfe,  New  York. 

r892  11  A.  University  of  Toronto;  iSSS-i8()2  The 
(Jovcrnor  General's  Medals  for  proficiency  in  the  Dep- 
artments of  ClassicH  and  Political  Science  in  the  Univer- 
sity of  Toronto  ;  Mlake  Scholarships  in  Political  Science, 
Prizeman  in  History;  1S92  and  1S93  Kellowshii)  in 
Jurisprudence.  Cohiiidjia  Collcn^e.  New  York;  1S93  AM. 
Columbia  CoIlc;re;  1894  Ivvaminersliip  in  Constitutional 
History  in  the  University  of  Toronto. 


